The Big Flop - Downsizing WeWork with Smosh's Ian Hecox and Courtney Miller | 36

Episode Date: May 20, 2024

Can the office also be a party? Would you really want it to be? For WeWork’s CEO and founder Adam Neumann, the answer was an unequivocal, hell yes! Neumann propelled his co-working space empire to incredible heights and a valuation over $45B, all while throwing nonstop ragers, hot boxing his private jet, and arm wrestling with Jared Kushner. But when the rent came due, Neumann couldn’t cook the books any further - not even in his personal infrared sauna - and the party was over.Ian Hecox and Courtney Miller from Smosh share a desk with Misha to give WeWork its annual performance review.Follow The Big Flop on the Wondery app or wherever you get your podcasts. You can listen to The Big Flop early and ad-free on Wondery+. Join Wondery+ in the Wondery app or on Apple Podcasts.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Wondery Plus subscribers can listen to The Big Flop early and ad free. Join Wondery Plus in the Wondery app or on Apple podcasts. The sun sets below the Manhattan skyline as a gaggle of office workers edge closer and closer to losing their minds. These are journalists working for the newspaper The Guardian. And while they scramble to hit deadlines, it's become impossible to concentrate. Booming through the office is the JZ song, Empire State of Mind. This is because the guardian is sharing office space

with another very noisy tenant, a company called WeWork. The employees at WeWork are generally a rowdy bunch, but things get out of control whenever Adam Newman, their beloved founder, gives an inspirational speech. Tonight's was a doozy, followed by cheers, tequila shots, and Jay-Z tracks. One of the Guardian reporters can't take it anymore.

They shout to the WeWork employees, shut up! Adam doesn't miss a beat and shouts back, you shut up! Another reporter walks up to the young CEO and asks, can you please turn down the music? Adam doesn't respond. Instead, he looks her in the eyes, turns up the volume, and mimes stacking dollar bills into his hands. He may be an asshole, but he's not wrong. WeWork is swimming in money.

For a time, it's the most valuable private company in the entire country. Before long, Adam will be out of the company. Thousands of people will be laid off and WeWork will crumble into bankruptcy. But tonight, Adam's dancing his heart out. As long as the company keeps growing, he figures what could go wrong. ... ... Temporary and flexible offices. It is a huge, huge business.

Newman would like the company to be an all-encompassing ecosystem. At the end of the day, it's a real estate company. We work with just flushing cash down the toilet. Just hemorrhaging money. We work the latest commercial real estate casualty filing for bankruptcy. $47 billion to bankrupt in just four years.

We are on a sinking ship. From Wondery and at Will Media, this is The Big Flop, Our owners sinking ship From Wondery and At Will Media, this is The Big Flop, where we chronicle the greatest flubs, fails, and blunders of all time. I'm your host, Misha Brown, social media superstar and president of the world at Don't Cross a Gay Man. And today we're talking about the man who sold the world

on the idea that a noisy, open office full of strangers was the ideal way to work. Adam Newman and WeWork. ["WeWork Theme Song"] Hey, I'm Trey Wingo. And I'm Kevin Frazier. And we're teaming up on a new weekly sports podcast called Alternate Routes. Each week on Alternate Routes, we leap into the sports multiverse where we pry open the sliding doors of a different what if moment in sports.

For example, what if the NBA never vetoed the Chris Paul trade to the Lakers? Listen to Alternate Routes on the Wondery app or wherever you get your podcasts. On our show today, we have two guests from Smosh. Check out their recent live show at live.smosh.com. First up is Courtney Miller. Welcome to the show, Courtney. Hello, I work. Yeah. Also on the show today is Ian Hecox.

How are you, Ian? I'm good. I do also work. So one could say that we work. Now, you two are coworkers, so what are your thoughts on co-working spaces? Do you love them, hate them? Our co-working space is really fun. We have our office here and we do have a really fun environment,

but I wouldn't say it's WeWork level of a quote-unquote fun environment. Well, our story today is about a guy who had an idea to remake boring offices into something better. But somewhere along the line, this not very exciting business pumps itself up into a huge billion dollar Goliath where the booze, drugs, and money sloshed around while the founder lost touch with reality and it all collapsed spectacularly. So are we ready to hear about the founder of WeWork, Adam Neumann?

Oh yes. I mean, you said booze and drugs, so let's go. So, ready to go. Alright, well, let's start with a picture of him. Oh! Okay. This guy listens to Tame Impala and doesn't wash his ass. He's got the slick back, but like eccentric, longer hair

that's just past the ears. He seems very complex, but the white shoes are so clean, alarmingly clean in that photo. Yeah, he looks like if Orlando Bloom went to like a Harley Davidson convention. I don't... Kind of a handsome man, you got to say. Yeah, he's a traditionally gorgeous man. He does come from a family of models, and you can't tell from these photos, but he's 6'5".

A model bloodline? Okay, I was kidding about the not washing his ass. It was totally a bit. LAUGHS Now, in 1979, Adam is born in Israel, and his family moves around a lot. But in his teen years, he lands in a commune called a kibbutz. Everyone who lives

there shares responsibilities, eats their meals together, raises their children together. But in 2001, Adam moves to the least kibbutz-y place on earth, New York City, to attend business school, but his grandma did give him $100,000 to start a business. Thanks, Bubby. Small amount of $100,000. Would you like to hear some of Adam's first businesses? Yes. Yes, absolutely.

Wait, hold on. Can we take a guess? Sure. You know what? He probably just tried to start a modeling agency. That's actually my guess. Um, it was collapsible high heels. No way. No way.

I've actually been seeing a shoe on TikTok right now that's been going viral that is a removable heel shoe. So he walked so they could run, clearly. Yeah, he's just ahead of his time. But he got the inspiration. He was living with his sister who was a working model and former Miss Teen Israel. So she inspired his first big idea. High heels with a collapsible heel

for more comfortable walking. Click clack. So would you buy this? I would be scared that it would crumble under my weight, but I would for the plot, absolutely. I'm trying to understand like, is it like a telescoping heel? Like how does it lock?

Is it more of a wedge that like expands like an accordion? The shoe isn't for you, Ian. You don't know that. Don't gatekeep heels. Don't gatekeep heels. I mean, this is what I've been waiting for. My only issue with the heel is that I couldn't collapse it. Well, apparently nobody wanted this because not really anybody bought it. So he moves on to his next business, which was baby knee pads for comfort while babies learn to crawl.

They're called crawlers with a K of course. And the slogan is just because they don't tell you doesn't mean they don't hurt. Oh, like animals can't tell us they're hurting, but we know they're hurting. He's like, we can do the same for babies. Mm. Crawlers isn't doing well either, and Adam is running low on money. So in 2008, he partitioned off part of his New York City office space, leasing it out to another tenant.

And this arrangement works out surprisingly well, which leads him to his next and best idea. He could rent out smaller portions of larger offices to individual contractors and small businesses. His company is called Green Desk. Oh, whoa, I didn't know that. It was like an eco thing? Is that why it was green?

Exactly. So it's an environmentally sustainable co-working space that features recycled furniture and is powered by wind energy. What does that even mean? In New York City? Does he have some friggin' turbines on the roof that it's powering everything? Yeah, I'm confused. But I mean, either way, Adam this time, he was onto something.

And after only a few Craigslist ads, the office space fills up immediately. So deciding to strike while the iron is hot, Adam sells Green Desk and cashes in. He walks away with about $300,000 cash plus more in future payments. Hopefully he used some of that to pay back Bubby. Yeah, G-Mall! But he can't get this co-working idea out of his head. He wants to try it again, but better.

So instead of just selling a shared office space, he wants to sell community. That's where WeWork is born. But how do you feel about offices that try to cultivate that Kumbaya kind of community? I mean, I think community has now become, like, the absolute, like, business buzzword. Like, every company wants to have a community down to, like...

I don't know, if you're selling bouncy balls, we're like, we need to build a community around the idea of bouncing. Everybody loves to bounce. Everyone here needs to care so much about this that it's basically your family. Well, Adam, he draws from his experience growing up Everyone here needs to care so much about this that it's basically your family. Well, Adam, he draws from his experience growing up and envisions a capitalist kibbutz. He wants a place where people could do more

than just work together. They'd eat, party, and work together. The offices would be stuffed with millennial catnip, like yoga classes, wine tastings, and networking panels. Things to keep you from going home. Where does Adam get this crazy idea that people would actually want to stay at the office all day? Himself, of course.

He's described his typical Monday as going to work at 7 a.m. and coming home at 3 a.m. And he's known for scheduling meetings after midnight. Any red flags there? Uh, yeah. It's no surprise to me that this was born out of New York City, where like, in order to afford a living situation that isn't living on top of somebody else,

like you have to be a millionaire. Yeah, I guess like creating a space where people wouldn't want to go home is actually like a big plus because people know that like home is a shoe box. But that's so strange though, because they're not working when they're staying and doing things like drinking or yoga classes

or wine tastings. So what's confusing to me is it just sounds like this guy wants to be around people more and he wants to be surrounded by fun and then work is also there. You know what I mean? Yeah, he doesn't care if they work. He's getting that check. You know, the three of us, we do similar-ish kinds of things. And a lot of what creative people do, you know, we love our work.

So do either of you find yourself working this kind of hard? I certainly did a long time ago, back in the day when it was mainly Anthony and myself working on the channel. It was like, yeah, we'll pull an all nighter for this. And that's a lot of like attitudes that YouTubers have. But I think like, when it becomes a business and you have employees, you can't assume that everyone is going to want to put in that kind of effort. You shouldn't expect anyone to put in that kind of effort because it's like, yeah, at that point, it's a job. Yeah.

I've had my eras where I'm very attached to my job and those are the times where I am the most stressed out, the least myself. But I don't know, like wine tasting sounds cool. And like, I mean, like everything you listed that WeWork offered, I'm like, great, that sounds actually kind of awesome and cool. Ian, if you started having yoga classes here, I would sign up. Well, Katie bought some yoga mats.

Oh, so, okay, so it's happening. So we're doing our own WeWork here. We're doing it. Awesome. Well, charismatic, enthusiastic Adam and his architect business partner, Miguel McKelvey take the community of the kibbutz, mix in the work-till-you-drop hustle culture that's become popular among their target customers of young entrepreneurs, throw in some trendy designs and free kombucha, and voila, in 2010, WeWork is born.

At its core, the business is this. They take out regular long-term leases on empty offices, then sublease those spaces month to month to individuals and startups at a markup. That's it. So Ian, you are a business owner. What do you think? Do you see any holes in this business plan?

It sounds like a real estate company and not a tech company to me. And I have a feeling that we're about to find out that he's going to convince people with a lot of money that it's more than just a real estate company and it's actually a tech company. The big critique of WeWork was that the number of people renting office space is going to fluctuate,

but WeWork is going to be on the hook for the rent, no matter how full or empty their offices were. But I'm sure this won't be an issue, because his timing couldn't have been better. Ironically, Adam owes a lot of his success to the Great Recession. Real estate prices are at rock bottom, allowing him to acquire office space for cheap. Recently, laid off workers are starting their own businesses and they want short-term leases on small amounts of office space.

In addition to all of this great timing, Adam turns out to be the pitch man for this moment. He's charismatic, he thinks big, and doesn't sweat the details. He presents WeWork as something bigger than a boring old real estate subleasing company, more like an exciting tech business. Or as he calls it, a, quote, physical social network. Fuck off.

Yeah. Not sold? It's one of those, like, hindsight things where it's like, we just didn't see this coming. And then now we look back and we're like, it's all just bullshit. But like, but like back then, they were going, that's disruption. That's a million dollar idea. So let's take a listen to the kind of stuff Adam says to promote WeWork. Here's a clip.

I want us to never forget that the future, while leveraging technology, lies in ourselves. It is us who will blaze the path forward, paved not with algorithms, not with software, but with values, with friendship, with common goals, and most importantly, with humanity. The next revolution is going to be the We Revolution. I have no idea what he was just talking about. He said, no, no, no, Ian, I know exactly what he said. He said, we're going to go and go, and when we do it, and we go and do it. And then we did it, and we saved the world

with our real estate company. Yeah, one leasing office space at a time. And then we did it and we saved the world with our real estate company. One leasing office space at a time. But it turns out this kind of stuff makes investors froth at the mouth and Adam starts raking money in. And on the surface, the whole thing is working. Customers are renting spaces, throwing parties and clacking away on their MacBooks late into the night. Companies like Smile Direct Club, Microsoft, and Amazon are all renting space

in WeWorks. Others in healthcare, fintech, and even news outlets are all working side by side. There's just one problem with this. The numbers don't add up. WeWork is expanding so quickly that it isn't filling enough desks to come out ahead. They were losing money on just about every lease signed. In fact, 2012 is the last year WeWork ever turns a profit. Wow. But to Adam, it doesn't really matter. Investors were happy to keep pumping money into it, so the company kept growing and growing. I mean, could you see yourself doing this if

people were just handing you cash? Yeah. Yeah, if somebody handed me a bunch of cash, I'm going, okay, we're gonna put Smosh in Nairobi. We're gonna have a Smosh satellite office in Tokyo. We're taking Smosh to South Africa. We're taking Smosh to Columbia. Opening offices everywhere, Smosh in every country.

Isn't that kind of what almost happened, Ian? That was somebody's idea, yeah. See, you get people that just think in that sort of growth mindset without thinking about what that really means. Which growth is the only thing that matters. I'm sure it'll work out fine for ol' Adam Boy, though. [♪ Music playing. End of video. Business isn't the only thing Adam is having luck with at this time. He's also falling in love.

Oh. Enter Rebecca Paltrow. Yes, that Paltrow. She's Gwyneth's first cousin. Stop. Mm-hmm, and Rebecca is on brand for a Paltrow. She's something of a socialite. Rebecca has just gotten back to New York

from a yoga training with Tibetan monks, and her bio states that she studied mindfulness under Mother Nature herself. Stop it. Well, when she met Adam, Rebecca was fresh off a six-year dating hiatus that she set up for herself to focus on her spiritual journey. So a friend of hers sets her and Adam up on a blind date.

The two hit it off and they go on a date and only a few months later, they get married. Rebecca is quoted as saying, a big part of being a woman is to help men manifest their calling in life. Ooh, she wants to be a muse. Okay, interesting. Interesting.

No issues here. Corgina. It's building a picture. Well, she definitely puts her money where her mouth is, because she gets a nice little one million dollar wedding present from her dad. Oh. And decides to invest it in Adam's company. Rebecca becomes WeWork's chief branding officer,

and from this point on, she and Adam run the company together, which is kind of cute. It's kind of a sleigh, power couple. So hand in hand, Adam and Rebecca run WeWork as it grows and grows. But there's one event in 2016 that takes WeWork from fun money to stupid money and triggers the insanity that's about to unfold.

And it only takes 12 minutes. First, I need to introduce this Japanese investment company called Softbank. They have a gazillion dollars, and I mean that almost literally. The CEO is a quirky guy named Masayoshi-san. He got in early with companies like Yahoo and Uber. He gave $20 million to Chinese tech company Alibaba because he saw a sparkle in the CEO's eyes. So, Adam is just the guy for Sun because Sun comes to WeWork's New York headquarters

to hear a two-hour pitch. But Sun is late and he's only got 12 minutes. Adam doesn't blink. He goes for it. He pitches Sun as they walk around the office and 12 minutes later, Sun agrees to give Adam $4.4 billion. That's it? Oh, come on. Hey, Ian, when you and Anthony sold Smosh for zero dollars, how long was that meeting? It was a series of meetings.

It was definitely not 12 minutes. Dang. Well, Sun later asks Adam, who wins a fight? The smart guy or the crazy guy? Adam responds, the crazy guy. Sun replies, yes, but you are not crazy enough. Uh-huh. Uh-huh. Oh.

Is this good business wisdom? Oh my goodness. There is something to it, I guess, like building a sort of like cult of personality. I feel like I heard the stories about Adam, how he walks around the office barefoot. Mm-hmm. Right? That's what he would do. What is with eccentric leaders showing off the dogs? Gotta let them breathe.

You know, they gotta stay grounded. Ian likes to take his shoes off. That's not true. I don't take my shoes off anymore. You used to do it a lot. I would generally, if I had to go anywhere, put my shoes on. I wouldn't just walk around the office

all willy-nilly with my feet out. Well, WeWork goes from being a cool startup I wouldn't just walk around the office all willy-nilly with my feet out. Well, WeWork goes from being a cool startup to one of the biggest privately owned companies in the world. They hire thousands of employees and have half a million members working across hundreds of locations around the world. By 2018, WeWork becomes the biggest tenant in Manhattan overtaking Chase Bank. So Adam and Rebecca are now fabulously rich.

How rich? Well, they spent $90 million on six properties, including a 60-acre farm in Westchester, New York with a waterfall and tennis court and a horse riding ring. Also, not one, but two estates in the Hamptons and a compound north of San Francisco with a guitar-shaped living room, a three-story water slide, an orchard, and a series of windows shaped like the opening chords

to a Grateful Dead song. Although which song exactly is somehow unreported? Hold on. That's sus. And of course, when you make this much money, it's party time. And I want to share a couple of examples. Amazing.

So, Adam famously loves Don Julio Tequila. He offers company stock to employees who take shots with him. And speaking of shots, one day Adam was looking to rent a WeWork space from a cutie patootie real estate kid, Jared Kushner. He convinced Jared Kushner to join him in a bar for a shot at 9 a.m. to help seal the deal and later resolved a dispute with an arm wrestle. Who are you taking in this contest? Who's your money on? Oh, Newman. Like, hands down. Jared Kushner's never had any sort of physical conflict in his life.

Like... I'll take your word for it. Also, just the leverage of that huge six-foot-five arm. Yeah. Adam won. Well, another legendary party story comes to us because Adam loves to hotbox his private jet. And honestly, who among us doesn't, right? RELATABLY!

On a trip to Israel, he leaves a cereal box stuffed with so much weed that when the crew discovers it, they're terrified they'll go to jail for international drug trafficking, and the plane is pulled from service. Do you think this kind of guy can successfully run a business? I think that person could successfully run a business if you hire other people to actually run the business. And you're just like the guy that goes around and talks about community and how you lived on a commune.

But that's not the guy he is, unfortunately. If I were to hear that behavior was from my boss, I would simply pack and run. Yeah. Well, after a while, Adam and Rebecca lose touch with reality, like, officially. His office included an infrared sauna, a cold water plunge, and a special ventilation system

that allowed him to smoke weed without the smell. Hell yeah. Hell yeah, that's my guy. See, that sounds incredible. All of that sounds incredible for me. I want that for me. Yeah. Well, according to the Wall Street Journal, around this time, Adam expresses some of his ambitions

to the people around him. He wants to be the prime minister of Israel. He wants to be president of the world. He wants to be the world's first trillionaire. He wants to end world hunger. And he wants to live forever. In what order? HOST 2 LAUGHS

Part of these ambitions start impacting the business. Adam and Rebecca envision WeWork as being so much more than just office space. Adam says the 90s were the era of the I. You know, like when everything had an I in front of it, like iPod. He goes on to say, quote, the 2010s will be the era of the We, and I am the we. Stop it, stop. Isn't that like a super villain line? It is, it is. I am we, I am inevitable.

Dude, that's crazy. I mean, he was on Coke when he said that, right? Well, legally we would never imply that anyone was doing drugs. Oh, sure. So Adam goes ahead and trademarks the word we, something I did not know you could do, and expands the business. That's awesome.

Yeah. I bet they spent so much money on lawyer fees. Honestly, sleigh. Rebecca heads up the company's first attempt at a non-office rental business. So let's listen to an interview where Gwyneth Peltrow asks her cousin about this new venture. So you're starting a school. Yes, so our school is called We Grow because we think that we're all students of life for life. And one of the most important things in life is to be in a constant state of personal growth.

I'm going off just vibes here, but I'm scared. Not a fan. Also, the admission certificates Rebecca sent to the children were personally signed by her with her name and a little heart. Oh, so cute, right? Oh, so sweet. Now, folks, We Grow is just the tip of the iceberg. To take a quick crash course through the rest of these offshoots, let's play a game.

Oh, boy. Here are the rules. I'm going to tell you what the Wii brand is and you tell me whether you think it is a real plan of atoms or something we just made up entirely. Oh, this is going to be so fun. Ready? Let's go. Wii Bank.

Definitely. Definitely. Real? Real. Yeah. Ding, ding, ding. We Bank. Definitely. Definitely. Real. Yeah. Ding, ding, ding. That one was real.

Oh yeah. Like of course they want to hold onto your money. We Live, which are apartments. Yeah. Yeah. Real. Definitely. Real.

We Laugh, Comedy Club. Nope, nope, nope. I cannot imagine him even understanding what comedy is. He's like, why do you need comedy? That's taking away time from work. Ding, ding, ding, you're so good at this game. Okay, we love a dating site. Ooh, that's so funny.

I think it would have been something they tried. A power couple running the word we, I think it would have been something they tried. A power couple running the word we, I think it would have happened. Yeah, they do have a good story. I feel like they were like, we could sell this. We have a story of our love. Okay, yes. No, we read that one up.

But it would have been great. We should let them know. Yeah. We connect, coffee shops. I suppose you could run it out of your we buildings. They should have called it we bean. We brew? We brew.

Oh, there it is. We brew. That would have been good. I would say yes. Yeah, you are right. How about we sail Caribbean yachts? No way. Oh no. No way. Oh no.

It sounds like Adam would love that so that he could, you know, partake. Yeah. Ding, ding, ding. That was a real offshoot of Adam's. Yeah. How about Wee Wee, also known as French Wee Work? Stop it. Stop.

Stop. No. No. No. No. There's no way. If this man sounds European, I feel like he would be smarter than that, right? That one was fake. We made that one. Oh, but it's good.

That's good. You should tweet that. So there were also We Sleep, which were hotels and shared bathrooms, Rise by We, which were gyms and believe it or not, WeMars, putting offices on Mars. I think imagine a company spreading so far that it's on another planet. There's nothing there. There's nothing there.

Not even people. So at its peak, WeWork is valued at $47 billion. So, at its peak, WeWork is valued at $47 billion. But remember that teeny little detail that WeWork is losing money on each new lease they sign? Well, that hasn't stopped. In 2018, WeWork has over 300 locations around the world and they are the largest tenant in London. In the first six months of 2018, they lose $690 million.

Don't you hate it when you almost lose $700 million? Don't you just hate it? So payments are coming due on many billions of dollars worth of leases and investors are getting impatient to see a return on their money. So Adam's only option is to take the company public, which means opening up his finances to public scrutiny. How do you think this is going to go?

That would mean that sane people were about to see what this company was pulling in. Yeah, it's literally the business equivalent of showing the receipts. Yeah. Mm-hmm. So it's 2019. Adam and Rebecca Newman are preparing to go public. Before their initial public stock offering, WeWork has to file something called an S1, which is a form that basically details your financial status to the public. Normally, an S1 is the most boring document in the world, but not for WeWork. Rebecca wants this to be more than a dry legal filing.

In addition to the boring financials, she wants to include something that will dazzle. So, Rebecca hires Vogue photographers and gets to work. Stop. So I'm going to show you a page from a regular S1. They mostly look like this. Courtney, could you describe? Oh my gosh.

Oh, it looks like a paycheck, but a lot of extra fees being tacked on. It's a very, very boring thing that I would ignore everything in the middle and just go down to the bottom right and go, okay, what am I making? Yeah, it's an Excel spreadsheet, basically. Oh, even more boring than that. Mm-hmm. Okay, now I'm going to show you a page from the section of the WeWork S1 titled, Drop into the World of We.

Can you describe this one? Who is this grown man jumping in the air? It's all over the place. I don't know who these people are. It's photos. There's a scuba diver. This is literally is giving when you download Canva for the first time.

This guy like went to like a Pantone store. He's like standing in front of a bunch of color swatches. There's this other guy that's like on a laptop that actually looks like a WeWork. It looks like a bunch of stock photos of just people vibing, whether they're underwater, on their computer or a grown man leaping into the air with joy.

Do you think like Rebecca's strategy here was like, okay, if they just look at the photos, but don't look at the numbers, it's literally that. People are going to buy into this. Because what is this text in the bottom of these? Like what is that even information? Well, this guy who is horizontally jumping above a set of stairs, all I can see is it says he is an LGBTQ plus pioneer. Yep.

Epic. Hey, good for him. I love it when companies have LGBTQ plus pioneers. Me. Like I'm gonna invest. I don't even care about the financials, I'm investing. We queer. We queer, ooh.

We queer. So Wall Street is not dazzled. Once the analysts made it past the flashy photo spread, they found the S1 full of red flags. First of all, for a company that leases real estate, it's filled with crazy language like our goal is to elevate the world's consciousness. Oh. Oh. Yep. What could that mean?

I don't know, man. That sounds like psychedelic behavior. But no amount of consciousness elevation could hide what the S-1 was really revealing. A look into a dysfunctional company. WeWork owed landlords $47 billion. Coincidentally, the same amount of money they were just valued at. They also used made-up metrics, like something called community-adjusted earnings, which

was just a way to make WeWork look more valuable. The S-1 also included a lot of troubling information about Adam, the word Adam appears 169 times in the document, particularly in the extremely unusual 10 pages of disclosure about the CEO. Huh? It's just like an insane, like, hype sheet. This sounds like someone who's embellishing their dating profile.

Yeah. Well, these disclosures include the fact that many of the buildings WeWork is renting space from are owned by none other than Adam Newman himself. Ha! There it is. So he was buying property. It gets worse. Remember how Adam bought the trademark to the word we?

We We. He bought it. Yes. Well, the S1 revealed that he sold the trademark to his own company, WeWork, for six million dollars. Oh. So the S1 also illuminated just how much authority the Newman's had over the company. The S1 described Adam as essentially indispensable to the company. And should he become indisposed,

Rebecca would choose his successor. So it's not a good look, to say the least. For the first time in about 10 years, Adam is about to get a dose of reality, thanks to Wall Street. How do they think this was going to go? They had to have had somebody in senior leadership that was like, hey guys, if the public sees this,

they're not gonna be thrilled. Or did they think that everyone was gonna buy into this like community woo woo? I'm sure that they had someone like that, but did they listen to them? Fair. No. That's fair. No.

So the fallout from the S1 is catastrophic for WeWork. Within a day, financial news outlets suggest the company will need to lower its valuation to attract interest. Analysts join the fray, and WeWork's ratings are downgraded into junk territory. The company's valuation plummets from 47 billion to just $7 billion. This is $40 billion of value that just evaporated

in the blink of an eye. It's almost like it never existed in the first place. It's almost like it's not a valuable company. Yeah. Crazy. I mean, for context, $40 billion is what it costs to run NASA for an entire year. For one year. Crazy. I mean, for context, $40 billion is what it costs to run NASA for an entire year. For one year. Wow. Yeah. And you know what? With NASA, you can get to Mars.

You can get an office on Mars with NASA. Also, $40 billion is like an enormous company like Twitter. Although who would pay $40 billion to buy Twitter? LOL. Couldn't be me. $40 billion to buy Twitter, LOL. Couldn't be me. Well, WeWork calls off the IPO. The company is spiraling downward. And shortly after this disastrous public display, there's a meeting between Adam and WeWork's major investors,

including Wall Street big daddy, JP Morgan Chase, CEO Jamie Diamond. Diamond reportedly tells Adam, it's time to go. So after almost 10 years of flying high, this is the end of Adam Newman at WeWork. Whoa. I feel so bad for him. You do? Like, it's not his fault, guys.

Guys, he just wanted babies to have comfy knees. Like, look... He just had... He had best intentions. Oh, you know how sad it was when he goes to his office and he's packing up his little ice bath? Now, I know Smosh has gone through some ownership back and forth. Can you tell us what happens to a company once a founder is no longer in charge?

Well, it depends on how crazy the founder is. If the founder is batshit crazy, yeah, maybe it goes into the hands of slightly more capable people that go, oh, okay, this part of the business ran really terribly. I think we could chuck that and then focus on the parts that work. What do you think is similar from anything that has happened at DeFi? Which was the company that owned Smosh and then simply jumped ship. Yeah, the company that owned us just ceased existing one day.

And then you stepped up. And then, yeah, I helped Rhett and Link acquire it, save it from disaster. And then later on, Anthony and I teamed up to buy it back. And I'm still in the process of getting a cold plunge in infrared sauna, put it in my office. Well, despite ditching their toxic CEO, the damage is done and WeWork is struggling. Two years later in 2021, WeWork does finally go through

with an IPO and becomes a public company. But it's not great. WeWork limps along, cycling through CEOs like Adam cycles through cereal boxes full of weed. The company cuts costs and closes 240 offices and tried to renegotiate remaining leases for better prices. Things complicate further for WeWork when 1,600 of those little phone booths in the shared offices have to be removed because of elevated levels of formaldehyde.

Oh. Yeah. Do you mean the thing that fills up our bodies when we die? Yeah. But the real kicker, of course, is COVID. And well, you know how that goes for offices. In November of 2023, WeWork files for Chapter 11 bankruptcy, but states that it will continue to keep its office spaces running throughout the process. So WeWork technically still exists, but since their bankruptcy,

they dumped 1.5 million square feet of office space, shrinking their footprint by 25%. This story feels like the social network fused with Fyre Festival. You know what I'm saying? Yeah, exactly. It's such a crazy fever dream where people have such high aspirations that are totally riding the Delulu train and then not realizing just how expensive things can be and also not valuing the people or decisions

that are happening around you as well. But I mean, the most important question, did they elevate the world's consciousness? Oh my gosh. I mean, I'm definitely more conscious of how bad of a job they did. And people were technically elevated if they were on a higher floor. Yeah.

There we go. In the WeWork building. There we go. Well, let's do a little Where Are They Now? Yes. Rebecca Newman is still all in on schools. Now her education program is called Soulful, spelled S-O-L-F-L. Any guesses what that S-O-L-F-L stands for?

I mean, something dealing with the sun. Maybe they like launched the children into the sky. Oh my God. Jesus. As like a sacrifice. No! To the sun god. No! That's really high level of consciousness. Wait, hold on. It is student of life for life.

Okay, so they're not teaching children like mathematics. It sounds like it's a glorified thing where like those entrepreneurs who offer like an hour consultation for like $900. Uh-huh. Do you think you'd get a better education there or at Kanye's school? Let's go.

We should find out. Which one would you rather send your kid to? Whatever one is signed with a little heart. Thank you. Oh, true. You're right. You're right. SoftBank CEO Masayoshi Sun says this about the WeWork debacle, quote, I made a mistake.

Oh. Because he's super rich. A little 47 billion dollar mistake. But who's counting? But Sun, he still has plenty of money, and now he's all in on AI, raising 100 billion dollars to invest in AI computer chips. Apparently he uses chat GPT to work out his investment ideas. So is AI swindling this guy out of billions of dollars?

Oh, my goodness. Finally, our hero. Do either of you happen to know what Adam Newman is up to now? Maybe he's doing some soul searching and he's like probably posting somewhere about like big things coming. You know, that's what I would. Oh, did he become president of the world? Oh, spoiler.

No, believe it or not, Adam Newman is back. He has started a new real estate business called Flow Global, which is Adam's attempt to solve the housing crisis with, guess what, a combination living and working space. Oh, boy. When somebody that has hundreds of millions of dollars says that they have the key to solving the housing crisis, I'm in, baby.

Yeah. Well, the real headline here is, Adam wants to buy WeWork back. And to buy the struggling company back, he's raised $500 million from tech venture capital firms. We never learn. Ian, he's trying to pull a U. It's going to be him and his wife, and it's going to be a YouTube video. And they're going to be like, we bought, we work.

Yeah. Well, I wish him the best of luck. It worked out okay for me. He does say that lawyers have been stonewalling him for months. So last little question here, are there any silver linings you can think of from WeWork? Must have been such a trip to work in a place like that. And I hope that everyone who had worked there is in better situations now, because if that's the case, then they have this crazy story of like, yeah, we would show up at nine, do shots, and do emails until noon, and then a yoga class at three, and then a meeting at 9 p.m.

Like, what a wild, wild chapter to have in your life. I hope that with stories like these, like people get better at sorting out the shysters. So, now that you both know about the rise and fall of Adam Newman and WeWork, would you consider this a baby flop, a big flop, or a mega flop? Pfft. Um, I mean...

I truly can't think of a bigger flop than WeWork. Truly. I think it's a mega flop. Yeah, when you look at the numbers, I think big mega flop energy. Yeah. Well, thank you so much to our incredible guests, Courtney Miller and Ian Hecox for joining us here on The Big Flop. And thanks to all of you for listening.

If you are looking for a deeper dive into the rise and fall of WeWork, Wondery Plus has you covered. You can listen to the seven episode series called We Crashed. We'll be back next week to tell the story of a man who earned the coveted title of Congress' biggest lil' wascle, George Santos.

Bye! Bye! Bye! The Big Flop is a production of Wondery and AtWill Media, hosted by me, Misha Brown, produced by Sequoia Thomas, Harry Huggins, and Tina Turner. Written by Anna Rubinova. Engineered by Andrew Holtzberger. Our story editor is Drew Beebe. Our managing producer is Molly Getman. Our executive producers are Kate Walsh and Will Melnati for At Will Media. Legal support by Carolyn Levin of Miller,

Korzenik, Summers, and Raymond. Producers for Wondery are Matt Beagle and Grant Rudder. Story editing by Brian Taylor White. Senior story editor is Phyllis Fletcher. Coordinating producer is Mariah Gossett. Music Supervisor is Scott Velasquez for Freesong Sync. Our theme song is Sinking Ship by Cake. And Executive Producers are Lizzie Bassett, Morgan Jones, and Marshall We are on a sinking ship We are on a sinking ship