How I Built This with Guy Raz - HIBT Lab! WeWork: Miguel McKelvey

Episode Date: April 21, 2022

When Miguel McKelvey was first featured on How I Built This in 2017, his company was growing at an astounding rate. WeWork was considered the unicorn of unicorns. But after reaching a $47 billion valuation in 2019, WeWork’s tide began to turn. Investors raised concerns about the company’s rapid expansion and unsustainable spending. Miguel’s co-founder Adam Neuman faced accusations of mismanagement and was forced to resign. The company withdrew a long-anticipated IPO filing, and not long after, Miguel left the company he had worked so hard to build.Since then, the cautionary tale of WeWork has become a bit of a cultural obsession, retold on podcasts, a Hulu documentary, and even an Apple TV series this year. This week on How I Built This Lab, Miguel McKelvey returns to reflect on his experience at WeWork, the lessons he’s learned, and what he’s working on now. Listen to Miguel’s original How I Built This episode: https://wondery.com/shows/how-i-built-this/episode/10386-wework-miguel-mckelvey/ Listen to the WeCrashed podcast from Wondery: https://wondery.com/shows/we-crashed/See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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It had tall windows, beautiful old details, and plenty of space for all of us. And being in that home on Airbnb, right in the middle of Vienna, walking distance from so much of the city, made it feel less like a visit and more like we were actually living there. Plus, taking a trip is the perfect time to host your space on Airbnb. Your place with all of its personal touches and its amazing location could make someone else's vacation even better. Your home might be worth more than you think. Find out how much at Airbnb.ca.com slash host. Hello and welcome to How I Built This Lab. I'm Guy Raz. This is the place where we break format and experiment with ideas and stories that you might not hear on our Monday episode. It's also a chance to find out what happened to some of the founders that I've interviewed on the show in the past.

And of all the founders we've had on the show, the one our listeners have most asked to hear from again is today's guest, Miguel McKelvey, co-founder of WeWork. Back in February of 2017, when I featured Miguel on the show, WeWork looked like an undeniable success story. And if you haven't heard that episode of how I built this, please do go and listen. Miguel was trained as an architect at the University of Oregon where he was also a walk-on basketball player and eventually worked with American Apparel to help open their brick and mortar stores. It was in New York where he met his WeWork co-founder, Adam Neumann. Miguel and Adam grew WeWork into a global empire of cool, well-designed co-working spaces where you'd find good coffee, ping pong tables, epic work parties, and free beer. It was the unicorn of unicorns. But not long after we talked, the wheels started to fall off the WeWork bus.

In 2019, the company tried to go public, with a value estimated at $47 billion. But public filings showed major losses, and soon, Adam Newman was accused of mismanagement and forced to step down. The IPO was postponed, and WeWork became a cultural phenomenon and cautionary tale. in the world of startups. And that was all before the pandemic changed the world of work for everyone. The story of WeWorks Rise and Fall has inspired a popular podcast, a Hulu documentary, and now an Apple TV series. Miguel McElveli, thanks so much for coming back to talk to us again. I'm happy to be here. Thank you for having me. So, of course, a lot has happened since we last spoke in February of 2017.

I went back and listened to that interview and a couple of things that you said at that time really stood out to me. Understandably, you were feeling really confident about WeWork. I mean, I think everybody was. And you said something like, this is a 100-year challenge. This is something that you wanted to keep

working on forever. So I wonder at what point did you start to see signs that things were maybe starting to change? That's a great question and I'm glad you brought that up because I do still feel at that time that that was absolutely true. I mean, I have no question in my mind that I was committed for it being, you know, the rest of my life. And so it does come as sort of an

emotional shock to even remember that, that that happened, that that changed, that I did end up leaving the company. So in terms of signs of change, I think there was definitely something that happened when we raised the multi-billion dollar investment round where, you know, our ambition shifted in a pretty massive way. I think this was SoftBank, right? SoftBank, it was a $4 billion investment that they made in 2017. Yeah, when SoftBank made that investment, it opened us up to a new way of thinking about how do you build a company and the way that, you know, I would say they prescribed and we agreed to was that capturing as much market share as possible was the way to go. Yeah.

And I think that was something you saw a lot in companies was it's not about profitability. It's about capture massive market share as fast as you can and keep competitors out. So that clearly was, I mean, that started to feel like a turning point because with that injection of cash, the sort of the approach changed and the approach was just acquire as much, you know, property as possible. and expand as quickly as possible globally? Yeah, and also build the internal machine in order to execute on that really quickly. And that's something which we were always really good at was executing on our vision and on our numbers

in terms of the number of buildings, the number of deaths, the number of members. And so we built that internal system with thousands of people and technology and just ways of doing things in a way that doesn't come quite as simple as maybe other industries. You know, it wasn't just copy, paste, repeat for us.

We were building buildings in far off lands all around the world, and that takes a lot of resources. And, I mean, that expansion, right, went beyond just co-working spaces. There was, like, there was a housing community called We Live. You guys began to acquire a bunch of other companies. Even started an elementary school called We Grow. I mean, that must have felt really exciting, but was there any moment in all of that where you, I don't know, from your vantage point, thought maybe this is not actually the right way to be doing things? Well, in the case of the things you talked about in terms of we live and we grow, I actually think both of those were really good experiments, you know, for us to be looking at other ways to build our company, you know, with a more diversified office.

I think those things actually had potential, and they weren't too far away from what we knew how to do well. But there was a lot more than that. I would say for us, a lot of it was some of the technology acquisitions. They're not at all things that I think were damaging necessarily to our financial position, but they were potentially a distraction. Acquiring meetup, for example, I think conceptually there was a lot of alignment and it made sense. But in terms of actually integrating and getting the benefit from these two communities that we believed was possible, it proved to be quite a bit harder than we expected. Miguel, you, I mean, we work, right?

You guys were expanding so fast into so many different areas, into so many different cities. With some distance and perspective now, do you think there could have been a more sustainable way to grow the company? I actually think that we were riding a tide of success. And when it comes to actually opening buildings and members moving in at the time, that really wasn't where we were failing. It wasn't like we were overextended, at least the way I see it. It wasn't like we were overextended in our ability to execute on the business model. I think what we were overextended in was the ability that we could get the continuous capital. we would need to continue that expansion. And those are two completely different things. So what was our failure? Like, was it on execution? I don't think so.

But it was more so on the belief that we could continue to grow this massive machine without ever hitting a wall in terms of availability of capital. We're going to take a quick break. We come back more from Miguel McElvey about WeWork. We'll be right back. Stay with us. Welcome back to How I Built This. We're talking with WeWork co-founder Miguel McHelvey.

Miguel, in January of 2019, WeWorks valuation peaked at something like $47 billion. And that ended up being somewhat of an inflated number, right? In part because we were later that year filed for an IPO and all financials became public. And we saw pretty massive losses that began to kind of change the narrative around WeWork. and ultimately the company had to withdraw the IPO filing. What was your reaction to what was going on at the time? Well, first, I would say the valuation itself is something that, you know, was that beneficial in any way? And had that remained lower, would that have changed the public perception?

Because as soon as you put numbers out like that, you know, people, their eyes go wide and they say, wow, is this real? Is this something that we should look at? Now, if that valuation would have been $20 billion is still a huge company and, you know, an incredible evaluation, 47 takes it to a place that causes a lot more skepticism. Now, when you get later on into the story, the challenge that we are facing is that it's not that those losses were a surprise. They were by design. You know, again, we were a fast-growing company and we were investing in our growth. And so we were making the decision to lose money. it wasn't so much that like, oh my God, all of a sudden we opened our eyes and we were losing more money than we thought. It's just that the market perception changed.

I mean, if you look about what did the market want, it completely changed after Uber's IPO. And all of a sudden, there was a shift in terms of the market narrative. So we were in a way subject to obviously our own decision making about how to build the business, but also to, you know, the winds of change in the public markets, which affected us a lot. Yeah, so as things began to kind of unravel and as the media scrutiny became super intense, there was a lot of focus on your co-founder, Adam Newman, and his charisma described as a cult of personality. You were attracted to his charisma.

I remember you talking about first meeting Adam, and that was one of the things that really made you want to work with him. But I wonder when things start to unravel, how did that affect your relationship with Adam? I was with Adam, you know, through the whole process of approaching the IPO and then, you know, through his exit. And, you know, I saw him trying to reconcile a lot of different things that were coming at him. And I feel like the decisions that he made through that process were truly, you know, for the benefit of the company. And, you know, he's received a lot of backlash and criticism for sure. but what I saw him trying to do through that process was save the company.

You know, in every step of the way, his goal was to preserve we work and to preserve what we had built. And so, you know, I came away from that experience with a lot of respect for him through that process because it was incredibly difficult to be, you know, at the center of so much controversy and so much criticism. So, you know, I was trying to be both a partner to. to him through the process and then also be loyal to the company and loyal to all the thousands of people who were a part of the we work journey. And so I was, you know, walking a line between those things. And when he decided to leave the company, my priority was showing up for all of the rest of the team members through that entire transition process and really remaining sort of hopefully a kind of

spiritual center of the company through what was a really, really painful process. There was a lot of anger, you know, directed towards Adam and some towards you, in part because he, you know, was able to walk away with a lot of money. Do you think that criticism was entirely unfair or was there any, you know, was there any legitimacy to it? I think a lot of the complexity in that kind of situation is that a lot of the narrative doesn't reflect the exact technical reality. And so I think one of the difficulties is that it's easy to count the numbers when you're looking at, you know, ownership of stock, which may or may not be liquid, may or may not be able to be sold at any time in the near future. And so I think what happened was a lot of people were associating, like, value with actual assets, with actual cash. And so then those numbers look quite inflated. And look, for anyone who starts a company like that, there's a simple reality that you own shares in that company.

And when you walk away from the company, whether you're fired, whether you resign, you keep those shares. There isn't really a mechanism for any founder that I've experienced. It's not like you just give them back. So there's this weird idea that like, hey, you walk away with millions or billions of dollars. well sure because that's in the shares that you got when you founded the company. What about what about the this sort of perception that Adam's leadership style created a kind of a cult of personality, you know, did you recognize the accuracy of those reports? I mean, do you think they're completely off base or do you think that maybe, you know, despite your friendship with Adam and having some time, you know, some distance? Do you know, do you think that maybe his style probably wasn't the right fit?

Wasn't the right style? Well, first, I think you have to go back to the beginning. And the two of us being partners, you know, we're quite different, as I said, the first time we spoke. And I think that- You're like an introvert. I mean, you're quiet and, you know, right? And you're more of a background person. Well, actually, it's interesting.

I wouldn't say I'm an introvert. I actually get energy from being amongst people. So I think, you know, for me, it's actually the most comfortable place for me is to be out with a lot of people amongst them all the time. And it's interesting in that definition because I think a lot of people would imagine Adam, because he's known to be so, you know, external in his, in his narrative. But Adam spent a lot of time away from people where he wasn't, you know, he might be in his own office behind closed doors where I was almost always amongst people because that's the way I most. enjoyed my experience. So, but I think that mix of our two personalities was something that when we were together and when we were aligned, I think was quite powerful. And I actually believe that we created a work culture that was extraordinary. And I think if you go on LinkedIn and you look at former,

you know, WeWork team members, you'll see time and time and time again, when people leave WeWork, they say, this was the greatest work experience of my life. You know, I'm so sad to leave. It was, I made the best friends, I've experienced incredible things. So I think there are many people who love their we work experience. And yes, there were others who didn't. But I mean, for me, I think the balance is toward the people who love their experience. So was his style wrong or right? I think that's a question which is very hard to judge because his style helped us build, you know, a great company, which still exists now, you know, and still exist around the world as a great brand that represents a new style of working, which didn't exist before. So I'm not trying to defend him because

there are a lot of things which I do think that he, you know, perhaps did in ways that could have been better. But I also think we have to put it into the context of like building a multi-billion dollar company is super hard. And it takes, it takes some pretty unique people to be able to do it. It's not like your regular old person is able to go into the world and do these incredible, difficult things. So, you know, I'm trying to look at him in complexity. That's been my process, at least. Do you consider Adam to be a friend? That's a good question. I mean, I consider him to be a business partner. You know, it's not, we don't live in the same place. We don't like hang out together socially right now, but I'm happy to know him.

happy to be connected to him. You know, we're brothers in sort of trial by fire more than just friends. Would you, I know we'll talk about this in a bit about what you're working on now, but would you ever start another business with Adam? I don't think that I would primarily because it doesn't support my own journey. I put myself into that second position because of a lot of insecurity and things that I thought I couldn't do. And so being around a person who's very much, and Alpha, you know, is very much like the person who wants to be at the center wants to be in control. I don't think that would be the right fit for me for my own growth and my own potential learning. But if I was just looking to like, I don't know, make money,

which is not what I care about, then I would say probably he's going to continue to be quite successful. All right, we're going to take another quick break. We'll be back in a moment more from Miguel McKelvey. His decision to leave the company he helped found and what he's working on today. Stay with us. You're listening to How I Built This Lab. Hey, welcome back to How I Built This Lab. Miguel McElvey, co-founder of WeWork is our guest. So Miguel, you stayed on until, I think, June of 2020, when you announced your decision to leave WeWork, that was like right at the thick of the pandemic, right? I mean, you were in New York, I think. And, I mean, first of all, you had six months as sort of, you know,

the six-month period after Adam left kind of staying at the helm of the company in the leadership position, massive downsizing already, and then COVID happens. How did it affect the business? Well, first I'll say, I mean, that entire process of downsizing was incredibly difficult and painful. And my heart goes out to every single rework team member who left the company at that time, because it's just incredibly hard to go from the optimism and the view of the future that we held at the time to, you know, being out of a job. And I can't discount in any way, any factors that affected people like that. So then add COVID to that, I mean, we were an incredibly social company. I mean, our business was to build these communities of members.

And so many of our team members were people who love to be surrounded by. people. I love being surrounded by people all day. Like, that's just my way of being. So for all of us who were like that, it was just crazy hard. And then, of course, it also affected the business because people weren't coming in. And I think the hardest part for us was that we're a little bit different than, say, a big company with their HQ, where they could just say, okay, well, we're going to shut down our HQ. All of our workers will be distributed and we'll figure it out. the position that we were in was that if we have one member who needs to come into the building to get something, whether that's a, who knows what, a FedEx delivery or a hard drive that they left in their office,

like we absolutely have to be there for them because we can't lock them out of their place of work. And so it put us in a very complex position where it's like, well, the world is saying shut down. The world is saying don't be open. You know, if you're not essential, you should be closed. and we're actually facing like this position where we're the empowerment to all of these small businesses and, you know, entrepreneurs. And it was very tough, very tough. Miguel, the story of WeWorks rise and then troubles has obviously been something of a cultural obsession, right? There's been a podcast, there's been documentaries.

There's now an Apple TV series. Have you been involved directly or indirectly with any of those projects? No, I haven't. And I think a lot of the reason for that was that I was always trying to make sense of it myself. And I don't really feel like participating in someone else's agenda was helpful to me in any way. So I really wanted to do a really, I guess, deep and thorough process of trying to understand, you know, what happened to me and what happened to those around me. And so, you know, rather than working on or with those projects, I actually went into like my own way, which was working with, you know, multiple therapists and other practitioners to really figure out like what happened here and, you know, what role did I play in it and how do I learn from it? And that's that's the way I engaged during that time, rather than participating in all of that other craziness. How do you feel about, I mean, about being portrayed in a dramatization of your life? Well, the first thing I noticed is like the guy they have playing me is

wearing a striped t-shirt and I've never worn a striped t-shirt like that in my life. So I'm a bit like, well, they got that part wrong, you know. It's weird. It's super weird. At first I was like, I'm not going to watch that show. What's the point? It's all been said before. When I saw the trailer, it flipped for me a little bit and I said, you know what? Instead of, you know, brushing it off, I said, I'm going to watch it and I'm going to see what it feels like. And the thing for me is that, you know, what really hooked me was that I saw the things that I created and that our team created on screen. And when I saw like the logo that I made, you know, wherever, way back in 2011, you know, on this incredibly high production show, I said, you know, I said, there's something to that,

to my work, to these things that I actually, you know, designed myself being portrayed in this way. And it made me curious, you know, to see how that's going to feel. You were the architect. I mean, you were the guy who was building out American apparel shops and, and that's how you eventually met Adam and I mean, you're not a tech person, you're an architect. That's your background. Yeah, and it's really what I love. You know, it's actually, that's part of the discovery through this time is that I did evolve, you know, in my role at WeWork from being very product focused and brand focused in the early days to being more of a leader and I was, you know, running culture and HR and stuff like that. So in a way, that's been a lot of my own self-discovery

to say, like, what do I really love about, like, in terms of the abilities that I have and what I can bring to the world? And design is something I haven't done much of in the past few years. So it's a place that I'm going into now and getting deeper into, like, what do I have to offer? What have I learned and what else could that transfer to? You know, where could I bring that, that sort of possibility that comes from great experience? All right. Let's talk about your post we work like. because you, of course, you left in June of 2020, and I know you've been open about, you know, working with therapists and talking through that time. But you're also working on a couple of new projects, and one is a platform, a financial platform called NONE that you've been involved

with. I guess it's around supporting businesses and entrepreneurs of color. Tell me about that project and what you're doing with it. The team that formed to create NONN, they're working to build something that can really create the financial foundations, the financial infrastructure to support communities which have been historically excluded from participation. So that's a place where I can't claim any expertise, but where I got interested is really how does that extend to the entrepreneur? Because a lot of times what you hear is from this sort of financial world is that you hit walls that sometimes you don't even understand, you know, where is the bias here,

what's blocking me from getting what I need. And so known is looking to address a lot of those things. And with my entrepreneurial experience, I feel like I'm able to sort of add a level of awareness or coaching to people who are in that process. So that's known. And then in it, and I would say a similar, but more direct way, I'm building a company called NIA Studio. And NIA is similar, but we're actually like building the companies ourselves. And so our, our goal is to figure out, you know, where can we find entrepreneurs who have been traditionally historically excluded, who do have really great ideas? How can we partner with them to build great companies? And really in the space of, of, again, physical locations. And because that's what, you know, we just touched on,

which I know. So for example, we just opened a shoot 360, which is a basketball training facility in Indiana. And, you know, basketball training doesn't sound like a big deal, but the entrepreneur, Fred Jones, who I'm working with, is a former basketball player at the University of Oregon. And for him to be able to go through this entrepreneurial journey to open this location is really transformative for him and his family and his future. And me being able to partner with him has allowed him to go through this process. And now, you know, we can build multiple locations on this foundation. So that's an example. where, you know, it may not necessarily be a world-changing business idea, but we believe that the actual

process and the outcome can be positive for the entrepreneur, for the team, and for the local community. Hmm. I know you're still in the process of kind of reflecting on and processing your time at WeWork. But as you go through that period, I'm sure you're drawing a lot of really important lessons for yourself and maybe for other people, other entrepreneurs, that, you know, that you go through that period, I'm sure you're drawing a lot of really important lessons for yourself. and maybe for other people, other entrepreneurs that, you know, that could use that, could use those lessons. What are some of the most important ones that stick with you, that you are really thinking a lot about?

You know, I think when you go through something that's traumatic, you have a choice to bury your feelings and move on to what's next. Or you can, you know, work through them and try to figure out what have you learned. and I've been sharing really publicly in my little community, my process. And part of what I'm, again, I would say curious about and working on is perhaps sharing that with more people. And I don't know the exact format of that, but I do want to figure out how can I share what I've learned in a broader way. But I would say one of the things that has come up for me is really this idea of integration. because I think we live in a society that's been very much shifted towards like crime and punishment. You know, you see people who might say something on Twitter and all of a sudden they're canceled, you know,

and from one day to the next, all of a sudden a person's whole life has changed because of one tweet that they made. And I don't know that that's actually serving us, you know. And I mean, you can look at Adam as an example of a person who did a bunch of things and was attacked and vilified and sort of canceled. there was some shadow in him and there's some shadow in me, there's some shadow in all of us. And what's the best thing is for us to bring that forward and try to bring awareness to it, not like punish people who make mistakes. I don't think that really serves us. I think when you look in a context of more restorative justice,

you know, the way that we actually see shadow and pull it forth and integrate it into ourselves, rather than othering it, it's not an easy process, but it's an essential one, I think. Miguel McHalvey, co-founder of WeWork, thanks so much for coming back on. Thank you for having me. Hey, thanks so much for listening to How I Built This Lab. You can follow How I Built This on Apple Podcasts, Amazon Music, or wherever you're listening right now. You can binge all of our episodes ad-free by subscribing to Wondery Plus in Apple Podcasts or the Wondery app. If you want to follow us on socials, we're at How I Built This on Twitter and Instagram, and I'm at Guy Raz on

Twitter and at guy dot ross on Instagram. This episode was produced by Chris Messini with editing by John Isabella. Our audio engineer was Neil Rouch. Our music was composed by Routin Arablui. Our production team at How I Built This includes Alex Chung, Carla Estevez, Casey Herman, J.C. Howard, Liz Metzger, Sam Paulson, and Kerry Thompson. Our intern is Margaret Serino. Neva Grant is our supervising editor.

Beth Donovan is our executive producer. I'm Guy Raz and you've been listening to how I built this.