We Study Billionaires - The Investor’s Podcast Network - TIP366: Billion Dollar Loser w/ Reeves Wiedeman

Starting point is 00:00:00 You're listening to TIP. Over the years, we covered books by multiple billionaires about how to build wealth. Today, we're doing just the opposite. As billionaire chalemonger is saying, invert, always invert. I've invited Reeves Vietermann to talk about his book, Billion Dollar Loser, about the rise and fall of WeWork and co-founder Adam Newman. This is a business thriller like you never heard it. So without further delay, let's hop to it.

Starting point is 00:00:26 You are listening to The Investors Podcast, where we study the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected. Hey, hey, hey, you're listening to The Investors Podcast, and I'm your host, Dick Broderson. And I'm here with Reeves Wiederman. First of all, Reeves, thank you for taking the time out of your business schedule to speak with me here today about your wonderful book. It's a story that the world needs to know.

Starting point is 00:01:06 Thank you. Thank you for having me and thank you for saying that. I'm excited to talk about it. So, Rives, you start your story about Adam Newman and WeWork with a quote from his old high school driver instructor saying that either Adam will end up in jail or he'll become a millionaire. With that said, the story of the rise and fall of WeWork is very much also the rise and fall of Adam Newman. So he said to himself, I am WeWork. Who is El Newman? Adam Newman is a group in Israel, which is where his driving instructor said that quote.

Starting point is 00:01:41 And from the early days, you know, Adam was not, you know, I don't know who is a normal teenager, but Adam was different in a lot of ways. He had kind of a disjointed childhood and was at times kind of a shy outsider. And then at times a very sort of charismatic teenager, which is when that driving instructor noticed these kind of whatever Adam was going to be doing, it was going to be something extreme. It was going to be interesting in some way. He was not going to live sort of a normal life. And to fast forward, Adam got to eventually move to New York City and he wanted to be a millionaire. He wanted to aspire to that dream that had been laid out for him and tried a bunch of different paths to get there and eventually landed on one that worked. We work. And we can talk sort of about how he got there. But that he was sort of the brains and visionary behind this company that grew faster than any. any company had in size and scope for something like what WeWork was. And so he's a complicated figure, as you mentioned.

Starting point is 00:02:40 And I think, you know, the reason we started the book with that quote was that there was a lot of good and a lot of bad in Adam and the way that he ran his company. And it's hard to separate those two things. And it's a very thin line between, often between becoming a millionaire and going to jail. And in so many ways, that's the case with WeWork where it was a thin line between great success and great failure. Before we work, it was so many entrepreneurs. There were other businesses. And one of the companies he had was called Crawlers. Crollers with a K, by the way. What kind of company was that? Crawlers was one of a couple of companies Adam started when he was a college student

Starting point is 00:03:19 actually in New York City. And Crawlers with a K was a simple idea. It was baby clothes with knee pads. And Adam at the time, while he now has five children, he did not have any. He was just kind of a young 20-something bachelor. I had this idea one night with some friends that he should could start a baby clothes company with knee pads so that babies wouldn't hurt their knees when they're crawling on the ground. I think any parent would be able to sort of look back at this and kind of say it's not really necessary. But for Adam, he was just casting about for any kind of idea. He was, could and this is when he latched on to. And he worked on the baby clothes company for a number of years and, you know, had some success. Some of the clothes had knee pads. Some of them didn't. But,

Starting point is 00:04:05 but ultimately it was kind of a silly idea, one like many early entrepreneurs have. That was a wonderful story. Reeves, talk to us, please, about the early days of WeWork. How did it happen? So Adam was trying to figure out how to build a successful business and the baby closed company wasn't really working. And so he, in this way, had moved to Brooklyn. He was trying to save money. He was cutting costs. And met a guy there, Miguel McHelvey, who was an architect who worked in the same building as him. And they sort of connected. They were both very tall. They were both about 6-7, 6-8. They ended up just talking about ideas together. And one of the ideas that sort of came about was Adam had heard about another person, a friend of a friend he had met,

Starting point is 00:04:52 who was running an office space business where it was essentially, you know, renting out a space in Manhattan and cutting it up into these kind of little offices. And from there, you know, being able to sort of charge more. And so Adam was kind of interested in this idea. Miguel is an architect and had kind of the design background and ability to do this. And I think from there, they were able to come up with his idea or focus on. this idea of starting a company like that. And so they threw some sort of real negotiation with their landlord. I mean, this was not an easy sell to get someone to buy into this. They started a company called Green Desk. And Green Desk was the first iteration of WeWork. It was a great success kind of very, very early on and kind of right away. And then from there, Adam and Miguel both had this dream of trying to start something big and new.

Starting point is 00:05:52 and on their own. Without this landlord, they're kind of overseeing things. And so they sort of went their separate ways and came up with the concept where we work and said about trying to find a building. We were talking right after the financial crisis, like a lot of people have been laid off. Like, it was the perfect time to start this community feeling. We're in this together. It just seemed like the right time, such a microcosm of the time. We can say a lot of people double down on Adam Newman this point in time. We have Srypner, one of the, I think he counts himself as one of the co-founders who agreed to a post valuation of $45 million at a time where they more or less had nothing. They had a good idea. He counted for a third of it. I don't think he

Starting point is 00:06:36 put in all the cash, but he was definitely a very important part of this beginning. And you had a lot of people doubling down on Adam Newman this point in time, not just him, perhaps one person more than anyone else. Because at this part in time, Adam Neumann has just been on his first date with his later wife, Rebecca Petrol. Could you please talk to us about the first meeting? It's sort of like an accounting meeting they had and the role that she would play not just in Adam's life, but also in the creation of WeWork.

Starting point is 00:07:01 The first date is sort of canonical in the mythology of WeWork and Adam Newman. He was this kind of playboy, 20-something New Yorker running a baby-clothes business, just trying to become rich. and he met Rebecca through a friend. And as they like to tell over and over again, you know, on their first date, Rebecca told him he was full of shit and that he didn't have passion in his life. He didn't have, he didn't believe in what he was doing. He didn't believe in his baby clothes business.

Starting point is 00:07:30 And so eventually they would talk about this as a sort of foundational moment for Adam and how he saw his work and what he wanted to do, that he wanted to do more than just make money. And Rebecca was key in the growth of we work in in several ways. She would fund some of the early days of the company by both just by the fact that she came from a wealthy family and being able to help with some of the funding and also connecting Adam to her circle, her social circle. So sort of instantly and very quickly, Adam was in a circle of people in New York who had money to invest in something like a young real estate company. And so, you know, she was crucial early on. And later on, she would. come to play kind of both a role in creating some of the things about we work that were great, some of the mottoes like do what you love and these things that really attracted people to the company. And then in many ways, as you can imagine with a founder's partner being involved in the business, that produced a lot of problems and chaos as well. If anyone's like, doesn't that sound familiar? There is this relationship between her and

Starting point is 00:08:36 her coaching growth petrol, just in case people are wondering. So definitely a will very wealthy family, invested around a million dollars at a time where they really needed the cash. Let's go to 2011. WeWork has just opened his third location in Manhattan's Meatpacking District. And Adam Newman was already talking about how he was building a hundred billion dollar business. He was, I don't think he's, he's never been shy with his ambitions. And WeWork had this unique startup culture. And it's really started to form. One of the things that really just make me smile whenever I read your wonderful book was that whenever WeWork employees joined the company, their role very much required more construction

Starting point is 00:09:17 work than the job description typically suggested. Could you talk to us about the culture of WeWork during those early years? Yeah, it was very much a startup. It was very much all hands on deck in good ways and bad ways. I think it was a very exciting place for people to work early on, you know, especially this was an era when a lot of tech startups were coming up. So if you wanted to be into developer or program or engineer, there were plenty of opportunities for you to go work at some fast-growing, fast-moving startup doing something cool. WeWork was a place for people who didn't necessarily

Starting point is 00:09:50 have those skills. It was a lot of designers. It was a lot of operations kind of people. And it was frankly, just a lot of recent college grads who were smart and ambitious and didn't know exactly what they wanted to do, but this sounded like a cool company to work for. So those early days were a lot of, you know, nine to five doing your job. And then at night, you're staying in the office, drinking with your friends, who are your coworkers, and painting a new we work space. It was a lot of kind of all these different things, everyone doing everything kind of all together. And I think, especially early on, there would be frustrations later. Adam made a lot of promises about how rich everyone was going to get from their stock options and things like that

Starting point is 00:10:33 that obviously didn't pan out. But for a lot of people early on, it was the most fun they'd ever had working at a job. One of the stories I really enjoy was how he was drinking tequila shots with employees and then promised them stock options that never materialized, but it seemed like very much like a, let's just call unique, unique culture. One more thing really to talk about what's unique and what probably most companies do not do, Could you talk about the summer camps because they were infamous, special event? Could you please talk to our audience about that?

Starting point is 00:11:07 Early on, I think around 2012, WeWork started holding these annual summer camps, which were for both employees and people who worked at WeWorks, at least at the beginning. And it was literally a summer camp in upstate New York, a few hours outside of New York City. they brought people there to do archery and go swimming and canoeing and do a lot of drinking. And essentially these became big parties. You know, they were meant to be, you know, they were meant to be sort of community bonding events. But in so many ways, community bonding at WeWork meant drinking. There were not a lot of other opportunities for building community.

Starting point is 00:11:47 And that was kind of the default way of doing it. And summer camp was just sort of the biggest example of that. It grew every year that they did it. While early on, it was a really fun weekend for everyone. Eventually, for a company that has a lot of liabilities and has a bunch of its employees at a summer camp drinking a lot of alcohol, problems can emerge. And that was certainly the case as the event got bigger and bigger and the company got bigger and bigger.

Starting point is 00:12:12 Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord, and every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is. From June 1st through the 3rd, 2026, the Oslo Freedom Forum is entering its 18th year bringing together activists, technologists, journalists, investors, and builders from all over the world. Many of them operating on the front lines of history. This is where you hear firsthand stories from people using.

Starting point is 00:12:50 Bitcoin to survive currency collapse, using AI to expose human rights abuses, and building technology under censorship and authoritarian pressures. These aren't abstract ideas. These are tools real people are using right now. You'll be in the room with about 2,000 extraordinary individuals, dissidents, founders, philanthropists, policymakers, the kind of people you don't just listen to but end up having dinner with. Over three days, you'll experience powerful mainstage talks, hands-on workshops, on Freedom Tech and financial sovereignty, immersive art installations, and conversations that continue long after the sessions end. And it's all happening in Oslo in June. If this sounds like your kind of room, well, you're in luck because you can attend in person. Standard and patron passes

Starting point is 00:13:36 are available at Osloof Freedom Forum.com with patron passes offering deep access, private events, and small group time with the speakers. The Oslo Freedom Forum isn't just a conference. It's a place where ideas meet reality and where the future is being built by people living it. If you run a business, you've probably had the same thought lately. How do we make AI useful in the real world? Because the upside is huge, but guessing your way into it is a risky move. With NetSuite by Oracle, you can put AI to work today. NetSuite is the number one AI Cloud ERP, trusted by over 43,000 businesses.

Starting point is 00:14:15 It pulls your financials, inventory, commerce, HR, and CR. rim into one unified system. And that connected data is what makes your AI smarter. It can automate routine work, surface actionable insights, and help you cut costs while making fast AI-powered decisions with confidence. And now with the NetSuite AI connector, you can use the AI of your choice to connect directly to your real business data. This isn't some add-on, it's AI built into the system that runs your business.

Starting point is 00:14:44 And whether your company does millions or even hundreds of millions, NetSuite helps you stay head. If your revenues are at least in the seven figures, get their free business guide demystifying AI at netsuite.com slash study. The guide is free to you at net suite.com slash study. NetSuite.com slash study. When I started my own side business, it suddenly felt like I had to become 10 different people overnight wearing many different hats. Starting something from scratch can feel exciting, but also incredibly overwhelming and lonely. That's why having the right tools matters. For millions of businesses, that tool is Shopify. Shopify is the commerce platform behind millions of businesses around the world and 10% of all e-commerce in the U.S.

Starting point is 00:15:31 from brands just getting started to household names. It gives you everything you need in one place, from inventory to payments to analytics. So you're not juggling a bunch of different platforms. You can build a beautiful online store with hundreds of ready-to-use templates and Shopify is packed with helpful AI tools that write product descriptions and even enhance your product photography. Plus, if you ever get stuck, they've got award-winning 24-7 customer support. Start your business today with the industry's best business partner, Shopify, and start hearing sign up for your $1 per month trial today at Shopify.com slash WSB.

Starting point is 00:16:12 Go to Shopify.com slash WSB. That's Shopify. slash WSB. All right, back to the show. As I was reading the book, I was trying to envision how it would look like. I don't think it really understood it before. I was watching this Hulu documentary. There's a wonderful documentary out there, and like they have recordings from those events.

Starting point is 00:16:35 And, you know, I don't know, it was a lot crazier than I thought. And I think you explained it pretty well that it was pretty crazy already. It was absolutely madness. Yeah, this was not a quiet company holiday party. this was a full out rager. Right. Let's go to March 1st, 2012. We work rented a nightclub, obviously, on the lower east side called the box.

Starting point is 00:16:59 And a Newman's vision of WeWork being the first physical social network. And so from marketing perspective, this sort of made sense because if you are a real estate dude, you could perhaps convince investors to value a company at five times revenue. But if you're a tech valuation, promising exponential, growth, you could command a much higher valuation. We work caught the attention of the reputable Silicon Valley Venture Capital Company, Binsmark. This is a company that previously invested in eBay, and they sort of like saw something there because even though that the sustained revenue growth weren't apparent, which was also the case with eBay in the early days,

Starting point is 00:17:37 like they had this really strong community around them. They had to count for something. The benchmark investment became very important for Adam Neumann and Wework. Why was that? It really established the company as a serious player. And before that, Adam had gotten money from friends, from friends of friends, and wasn't until benchmark came in and gave sort of its stamp of approval on the company that people had to take it seriously. And in particular, had to take it seriously as something other than a real estate company, because benchmark, as you mentioned, was a tech investor. They had had this famously great bet on eBay. And They were invested in Uber and Snapchat and these kinds of companies.

Starting point is 00:18:19 They didn't invest in real estate companies. And there was some resistance from the benchmark side, is this really the kind of company that we want to invest in? But once they did, it gave we work this sense about it that they were a tech company in some ways. And they were, if not explicitly, a tech company. They were part of what at the time was just the booming tech startup industry. So I think the money was crucial, but just as crucial, if not more so, for WeWork, was

Starting point is 00:18:50 who benchmark was and being able to say that these types of investors were investing in WeWork. We talk a lot about, I don't think we more or less have talked about Miguel, he's his co-founder. With this deal, the ownership structure was screwed because Miguel wanted to, wanted this deal probably more than Adam. He wasn't really happy about the valuation. And so they made this deal, where, I'm pretty correct, if I want to say around $100 million, whenever they reach to that point in terms of valuation, some of the ownership were skewed towards Adam. Also because at this point in time, Miguel sort of like, he saw the writing on the wall. He was tying himself to this Adam Newman rocket ship.

Starting point is 00:19:31 And even though he wasn't happy about everything that was going on, like he could see where this was going and who was driving this ship. So I sort of wanted to mention that. I think this was a crucial moment where both Adam and Miguel saw virtue in the deal in one way or another, but it was a moment where Miguel did feel strongly about the deal and doing it and was willing to give up some power to his co-founder that would have consequences for years to come that we work. And let's remember these are very early days. They were making very little money. They made a $1.7 million profit in 2012, which was, by the way, the last profitable year in the company's history.

Starting point is 00:20:13 So these were early days. It was incredible that could raise that kind of money. And just a fun backstory, you know, at this part of time, they had a 16-year-old kid who was director of IT. Talk about it being a tech company, right? And so it was all marketing. It was just incredible. Let's fast forward to 2014.

Starting point is 00:20:33 So WeWork has secured a private post-valuation of $5 billion. And it might be a little surprising to learn that WeWork had only two dozens of spaces is producing close to $150 million in revenue because a far higher valuation, they had a far high evaluation that's a international workplace group. They brought in $2 billion in revenue. They showed a profit and they had more than 2,000 locations. So we have a lot of investors out there and they might be like, this makes no sense. How can that be worth $5 billion?

Starting point is 00:21:04 So let me throw that over to you, Reeves. What was going on? I think you have to think about we work within the broader context of where this was all happening and when this was all happening. And this was an era where companies were becoming bigger and bigger and bigger, very fast. And these were not, no longer sort of companies that were growing slowly and responsibly, like the sort of ethos of the era was to grow as fast as you could, as big as you could. And once you did that, you could figure out how to make a sustainable business out of it. That was sort of the idea behind we work. If we funnel enough money into this

Starting point is 00:21:42 company that they will kind of be able to grow big enough to sort of figure out a new way of operating a real estate business that allows you to make more money. What actually separated WeWork from IWG and other competitors like it? WeWork was cool. It's hard to remember that now. It was very cool. They were hip offices. There was something to the energy in these offices in a lot of ways. You know, in IWG office, the printer is going to work and the coffee will be there. But that's kind of it. It's a boring kind of ho-hum space.

Starting point is 00:22:21 We work took a lot of care to try to cater to younger workers to make it a cool place to be. That was sort of what was in theory supposed to separate WeWork and make it the leader in this was the attention to detail. whether that justified the valuation. I mean, I think clearly in hindsight, it didn't, but there was just this notion, both that if you grow big enough and fast enough, you could figure out a way to kind of connect all these things. And there was a belief in Adam. There was a belief in him as this kind of entrepreneur, founder who was a visionary and could kind of make things, you know, out of nothing and do the impossible. And so people wanted to make those kind of bets because when

Starting point is 00:23:05 those bets paid off, the rewards were huge. Well sat. So much go into the narrative. If we just take another two years here, we're in 2016 here. At this part in time, the wave of funding had that ballooned since the recession has sort of fallen off. Adam Newman and we worked, at this part and time, they burned through a lot of money. They had investors from all over the world, Israel, New York City, San Francisco, Beijing, at this part in time, because they were burning so much cash, it seemed like the only option was to IPO, then also opened WeWork up to public scrutiny. And both Miguel and Adam Neumann wanted to keep the company private as long as possible, which, you know, hindsight's always 20, but if you knew what's going on, it probably makes even more sense

Starting point is 00:23:48 why they wanted to do that. So they were sort of like in this, this tricky situation. And then all of a sudden, perhaps the only person in the world. who could save the company showed up. My Yoshi's son, founder of SoftBank, a lot of people might know him as Masa. But for those of us who are unfamiliar with him, could you please introduce Massa and how he eventually invested more than $4 billion in WeWork? Because this is an interesting guy.

Starting point is 00:24:15 Yeah, fascinating guy. Masa is sort of a serial tech investor entrepreneur. He grew up in Japan and had built this large company from scratch. by himself. And SoftBank initially was just a company that sold software and became ultimately the biggest distributor of computer software in the 80s in Japan. And eventually, Masa sort of moved into bigger and bigger parts of the tech world. He got into broadband internet early on. He got into mobile phones after that. He made one of the most successful venture capital investments of all time, which was his small investment in Alibaba, which paid off in billions and billions of

Starting point is 00:25:01 dollars. And so he was just someone who liked taking risks and like making these big bets, much like Adam Newman. Masa famously in the late 90s during the first tech bubble had both, at one point, become the richest man in the world, if you look at his holdings. And then he promptly lost more net worth than anyone in history. when the bubble burst and because so much of SoftBank's wealth and his wealth was tied up into these tech stocks. So he was just this kind of person who liked to dream big and think big. And that is kind of one of the main reasons that when he met Adam Newman, he and Adam connected in a way that Masa liked to connect with the founders that he invested in.

Starting point is 00:25:47 Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up. up, and customers now expect proof of security just to do business. That's why VANTA is a game changer. VANTA automates your compliance process and brings compliance, risk, and customer trust together on one AI-powered platform. So whether you're prepping for a SOC 2 or running an enterprise GRC program, VANTA keeps you secure and keeps your deals moving. Instead of chasing spreadsheets and screenshots, VANTA gives you continuous automation across more than 35 security and privacy friends. Companies like Ramp and Ryder spend 82% less time on audits with Vanta.

Starting point is 00:26:31 That's not just faster compliance, it's more time for growth. If I were running a startup or scaling a team today, this is exactly the type of platform I'd want in place. Get started at Vanta.com slash billionaires. That's Vanta.com slash billionaires. Ever wanted to explore the world of online trading, but haven't dared try? The futures market is more active now than ever before, and plus 500 futures is the perfect place to start. Plus 500 gives you access to a wide range of instruments, the S&P 500, NASDAQ, Bitcoin, gas, and much more.

Starting point is 00:27:09 Explore equity indices, energy, metals, 4X, crypto, and beyond. With a simple and intuitive platform, you can trade from anywhere, right from your phone. Deposit with a minimum of $100 and experience the fast, accessible futures trading you've been waiting for. See a trading opportunity. You'll be able to trade it in just two clicks once your account is open. Not sure if you're ready, not a problem. Plus 500 gives you an unlimited, risk-free demo account with charts and analytic tools for you to practice on. With over 20 years of experience, Plus 500 is your gateway to the markets. Visit plus500.com to learn more. Trading and futures involves risk of loss and is not soon

Starting point is 00:27:53 suitable for everyone. Not all applicants will qualify. Plus 500, it's trading with a plus. Billion dollar investors don't typically park their cash in high yield savings accounts. Instead, they often use one of the premier passive income strategies for institutional investors, private credit. Now, the same passive income strategy is available to investors of all sizes thanks to the Fundrise income fund, which has more than $600 million invested and a 7.97% distribution rate. With traditional savings yields falling, it's no wonder private credit has grown to be a trillion dollar asset class in the last few years. Visit fundrise.com slash WSB to invest in the Fundrise income fund in just minutes. The fund's total return in 2025 was 8% and the average annual total return since inception is,

Starting point is 00:28:46 7.8%. Past performance does not guarantee future results, current distribution rate as of 1231, 2025. Carefully consider the investment material before investing, including objectives, risks, charges, and expenses. This and other information can be found in the income funds prospectus at fundrise.com slash income. This is a paid advertisement. All right. Back to the show. There was a lot of things in this story, they really made me smile. And I think that Masa wanted Adam Newman to be crazier and I'm more ambitious. I really liked. It takes one to know one. I wanted to mention that. But then one funny story is the story about the digital napkin. I'm sure it's going to hit home with our audience. Could you just briefly go over that story? It's just a wonderful, wonderful story about

Starting point is 00:29:34 these two characters. We work in SoftBank had been discussing a potential investment. Masa was at the time investing the $100 billion vision fund that he had raised. And WeWork was a potential bet to place. And the story as it goes, which the account from all sides is that it's true is, is Masa showed up at WeWork headquarters one day for a tour to meet Adam to kind of get a look at what WeWork looks like. It was supposed to be a couple hours long meeting. Mesa was late. He actually ended up meeting with Donald Trump in New York that day, who was the newly elected president of the United States. And by the time Masa got to WeWork headquarters, he only had 12 minutes to go on a tour is what he told Adam. It was basically, you got 12 minutes, sell me.

Starting point is 00:30:21 They went on his tour. Masa said he had to go, told Adam to join him in his car as he drove to his next meeting. And basically right there on an iPad, they drew up an investment that ended up being $4.4 billion. And those were the numbers that they were talking about right there that Masa and Adam, I mean, that's not a legal document, but it's better than a handshake agreement that these two men had come to for $4 billion over half an hour. Wow, that's unbelievable. So Reeves, SoftBank's investment was officially announced in always 2017, and that took WeWorks valuation from $17 to $20 billion.

Starting point is 00:30:58 Perhaps the biggest winner was Anna Newman. He cast out $368 million, nearly three times as much as every other WeWork employed. was able to cast out combined. Some of that money was earmark for the more lavish lifestyle than he and Rebecca was living. Something that might sound a little odd because at the same time they were talking about living in asset light lifestyle and being hippies living off the land as Rebecca phrased it. How did the new men's live? They had a very asset heavy lifestyle to point on it. They had at 1.7 or 8 homes, employees kept finding out about new homes that they had. They had three different apartments in New York City, two homes in the Hamptons, a couple

Starting point is 00:31:41 homes in upstate New York, eventually a home in San Francisco that was gigantic, so large that it had a particular room that was shaped like a guitar. And they had spent tens of millions of dollars on homes. They had multiple nannies for eventually their five children. In many ways, we were, which by the time the Newmans were as wealthy as they were, was a giant, company with thousands of employees, they ran it a little bit like a family business. You know, Adam convinced the company to buy a $60 million private jet that in theory was for the company's use, but in practice was essentially only used for Adam's travel, work, and occasionally personal. In the Newman's case, that the blend there was hard to separate.

Starting point is 00:32:29 So Adam lived the life of someone who was a billionaire before he was actually a billionaire, in part because he thought that's where he was heading. That's such a wonderful story. As you were saying, it was a, let's just call it somewhat lavish lifestyle. And keep in mind that in 2018, WeWork was on pace to lose almost $2 billion, and it was already running low on cash, despite raising more than $5 billion since 2015, when Newman said that WeWork wouldn't need any more private investment. One of the inventions to manipulate investors, if we can be as candidates,

Starting point is 00:33:04 that was to create a new metric that he called community-adjusted EBITDA. So, for instance, in 2017, it turned a loss from $933 million into a profit of $233 million. What is a community-adjusted EBITDA? I never heard that before. It sounds interesting. Neither had anyone else when we were announced it. Essentially, what community-adjusted EBITT tried to do was to make the case that when after WeWork opened a new building and got it to a point where it was operating as it would,

Starting point is 00:33:40 which was a period of sort of 18 months to two years after opening a building, their point was you need to factor out all the money we're spending on free rent that were giving to people on to get them into the building, on broader marketing expenses, on on the construction, on things like that that they argued would go away over time. And so the better way to think about how much money the company was actually making was through this metric. There were two problems with it. One, the name was bad. And the name kind of seemed cheeky and sort of fed into the notion that this was not a serious company in a lot of ways.

Starting point is 00:34:18 And then the other problem with it was that those costs weren't going to go away. Some of them would obviously diminish over time. But this was sort of a metric that imagined a kind of pie in the sky scenario where the marketing costs of needing to fill a bill. with people, we're going to just completely disappear at a certain point. And that just wasn't the reality of the way that WeWorks business worked. Reeves, in April 2019, and this was just a few months before all came crashing down, you met Adam Newman in person. Whenever you're reading Bill and a Dollar Loser, it's easy to make fun of his lofty goals. And we also had to remember that the difference between being a visionary

Starting point is 00:34:56 leader and a leader having visions, that's often just success. You know, thinking about if we had Steve Jobs and he was saying everything he did and it didn't succeed if you just make that thought experience. Keeping that in mind, do you think that Adam Newman was a true believer in his lofty goals or whenever you met him, do you instead think that he played like a long con knowing that he could continue to sell out his share with each round of funding, making himself a multimillionaire and then turned a billionaire if he just kept up appearances? I think it was a little bit of both. I think Adam believed what he was selling at Weaver. He believed that the spaces were communities that made people's days better.

Starting point is 00:35:38 He believed that his company was making the world better. He believed that he was making the world better. At the same time, he understood all the reasons why people should be skeptical of WeWork. And he was very good at telling an alternate story. He was very good at telling the version of the story where this was something other than a real estate company, where this was a free coffee and all the cool people and the beer taps were not just decoration, but they were actually part of building something that was a new way of thinking about real estate and a new way of thinking about the way that we were. And he told that story. And I think he believed it.

Starting point is 00:36:18 Now, did he believe that his company in a rational world was worth as much as some people were willing to say that it was? I think to some degree he did, to some degree he thought it should be even bigger. But he also knew he was selling a story and would often say that that was the key to selling WeWork. Let's go to the second week of May here in 2019. So this is a few days before Uber listed a Sets at a $70 billion valuation. Goldman Sachs gave its presentation to WeWork with a valuation of $96 billion. At this part in time, they were calling WeWork to be the lead underwriter of this upcoming IPO.

Starting point is 00:37:00 Goldman Sachs even had a slide called Your Path to a trillion dollars. Then they were comparing WeWork with Salesforce, Shalibaba, Google, and Amazon with this ego-boasting modifier, you are scaling faster. Which is kind of interesting because this was a real estate company that by definition had a harder time scaling. Real estate is already a fragmented industry compared to something like Google, for instance, that's very scalable. But these valuations were much higher than in the latest round where WeWork was valued at $47 billion. And already outrageous valuation considering that it was essentially an agreement between Massa and Adam Newman that both have an incentive to boost the valuation. This was this famous napkin deal. They both wanted to boost that valuation.

Starting point is 00:37:44 So in the second week of September 2019, J.P. Morgan, Goldman, Goldman Sachs told WeWork that the companies had to go public. all of a sudden with a valuation closer to $20 billion, and the press wrote about even lower evaluations. You know, at this point in time, the Uber thing really didn't work out, their evaluation, like a lot of stuff going on. Before the end of September, Adam Newman's fate was sealed and he had resigned. So, bombshell, what happened, Reeves, around this time? So many things was going on.

Starting point is 00:38:15 It was a lot. It was a complicated storm of things. But I think when you look at it, few things happened. and basically things caught up to WeWork. They had been losing money for years. Eventually, they were losing $2 billion a year, as you noted. And suddenly, that was a lot of money. And, you know, there were other companies that were losing lots of money

Starting point is 00:38:35 and were being given the benefit of the doubt. And maybe WeWork could have survived that. But at the same time that this was happening, the public was learning all about Adam Newman and learning all about the stranger parts of this company and the strange way that Masio Shisan was, was propping up the company. All of the stories about the drinking and the partying and the weirder parts of WeWorks business, We Grow, elementary school that they started. We live,

Starting point is 00:39:01 the apartment buildings. The way Adam Newman talked about WeWork as an agent that was going to change the world. And so all of these things sort of came out in WeWork's S1 document, this document that is eventually released to the public as part of any kind of IPO. In that document, all that stuff became clear and in the coverage about it, there were all these conflicts of interest in the document. Adam and his family, Rebecca as well, were being given a huge amount of control over the company. And I think that that just kind of gave this impression that this company was not serious, that it was not actually what it was selling to the world. And the stock market and the major investors who drive the stock market weren't willing to take a risk on it. And when that

Starting point is 00:39:48 happened, it became clear to even Adam Newman's biggest backers that the only way forward for the company was without Adam and he was sort of pushed. Basically, a coup was staged and he was pushed out of his own company. Reeves, what was the deal? I know I'm sort of like putting you a bit on the spot here and it's not, we don't need necessarily accurate numbers because I think a lot of it is sort of like unraveling these days as we're recording this. This is the 9th July. Some information come out later, also after the publication of a few books, like, what was the deal that he signed whenever he was ousted? He signed a deal at the time that was going to allow him to sell roughly a billion dollars

Starting point is 00:40:29 of his own stock. In addition, he was going to be able to get some loans, paid back hundreds of millions of dollars of loans that he had taken out. He was going to be paid $185 million consulting fee for several years, which was particularly galling to a lot of people. And all of this just to get him to leave, to get him to leave his own company. All those amounts have sort of been subject to various sort of legal back and forth over the past year and a half. And it now looks like Adam's going to end up getting about half that, which is not the billion he thought he was going to get, but is also not nothing. And I think in that sense, it's hard to look at Adam Newman's story as a failure. In fact, for him personally, he's become wealthier than he ever could have imagined.

Starting point is 00:41:10 So where does all of this leave Anna Newman? Today, where does this leave we work? Their stories are now obviously connected but different. And for Adam, he's mostly been laying low. He hasn't really talked publicly about anything since leaving the company. He's been quietly making investments, a lot of them in the real estate world, a lot in the residential real estate world. So he seems to think that that may be the kind of area that he wants to try to disrupt next.

Starting point is 00:41:38 And I think in a lot of ways, he is just the kind of person who investors are going to be willing to put money behind because he is that sort of ambitious visionary entrepreneur. For WeWork, pandemic was not great for an office leasing company of any kind. They struggled a lot through this. It did give them a chance to sort of reset things. And the thing they're now pitching to the world is flexibility that WeWork offers. It is a company that is what they offer is different kinds of office space in different sizes and shapes. Their bet is that people now, after the pandemic, will want a variety of options, that you may not

Starting point is 00:42:18 want all your employees coming to one central office all the time. Maybe all you need is a couple of Wii works. So that's the bet they're making. I think it's going to be a hard one to pull off, but that's the one they're going to try to make in our post-pandemic world. Fantastic, Reeves. We started billionaires here on this show, No Surprise, that is the name of the show. There are so many great books that we read and we say, you know, you should do XYC,

Starting point is 00:42:41 and this is how this billionaire became successful. We have Charlie Munger, the vice chairman of Berksa Heatherway, and, you know, he talks about Invert, always Invert. And with that mindset, I started reading your book, that's probably not the way you want to become a billionaire. But, you know, it would. That's fair. Right.

Starting point is 00:42:59 But it's such an amazing story. and I'm holding this up to the camera here, which probably works better if you're watching this on YouTube than on a podcast. But a lot of doggies here. This is truly an amazing book. A fantastic story. And it's one of those things where you sort of like need to just need to read it to figure out how crazy this story really is. We're all this said, Reeves, thank you so much for speaking with me. Where can the audience learn more about you and billion dollar loser?

Starting point is 00:43:27 They can learn about it at billion-dollar loser book.com. The book is available anywhere. It is available for audiobook, for anyone who prefers to listen among your listeners. It's available anywhere books are sold. And actually, the paperback edition of the book just came out this week. So this is good timing. And I hope the book has lessons for aspiring billionaires to learn from and avoid some mistakes. Well, Seth, Reeves.

Starting point is 00:43:55 Thank you so much for making time to speak. with me here today. Thanks, Steve. All right, guys. So before we end of the episode, I wanted to talk about an interesting opportunity to work with us here on TIP. You know, a lot of things has happened since it was just Preston and me back in the day doing the podcast. We have more than 50 million downloads now of the main show, 18 people on the team, seven new job openings. So bunch of stuff happening and we would really like for you to join us on this journey. One of the positions, specifically, wanted to talk about is the position of the new YouTube host. As a YouTube host working from home, you'll be asked to ideate, strategize, and record native YouTube videos and be a part of both

Starting point is 00:44:39 live and online events. Really, as the YouTube host, we expect for you to be the talent. And then we have a small team of designers. We have three designers work on the YouTube project right now. They will do all the creative work around the video. We're looking for someone who has a very entrepreneurial mindset and ambition. We want to grow the audience first and then figure out how to make money next, sort of like what we did here on our podcast too. And if you can just mention one more thing, that's very important, is that you enjoy learning yourself, but you also enjoy teaching other. That's basically the position. Whenever we talk about YouTube posts, we're talking about someone who can also educate our audience. You can read more about the position at the ambassador's

Starting point is 00:45:20 podcast.com slash careers. And if you do get the job, the plan is that you will be training. by me personally here in Denmark the first week of your employment. Please send your application or any questions that you might have to stick at theinvestterspodcast.com. That is stick at the investorspodcast.com. Thank you for listening to TIP. Make sure to subscribe to millennial investing by the investors podcast network and learn how to achieve financial independence. To access our show notes, transcripts or courses, go to the investorspodcast.com. This This show is for entertainment purposes only. Before making any decision consult a professional,

Starting point is 00:46:00 this show is copyrighted by the Investors Podcast Network. Written permission must be granted before syndication or rebroadcasting.

We Study Billionaires - The Investor’s Podcast Network - TIP366: Billion Dollar Loser w/ Reeves Wiedeman

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.