Mark: Alright Michelle, quick one for you. What do you get when you mix a messianic founder, billions in venture capital, and a real estate company pretending to be a tech unicorn? Michelle: Wow. That sounds like a very, very expensive hangover. Or maybe just a really good documentary series. Mark: Exactly! And today we're diving into the definitive story of that hangover: Built to Lose: How the Billion-Dollar Dreams of WeWork Crashed and Burned by Eliot Brown and Maureen Farrell. Michelle: Ah, the Wall Street Journal reporters who basically broke the story as it was happening, right? I remember their articles. Their reporting was a huge part of the unraveling. Mark: The very same. They had a front-row seat, which is why the book is so packed with insane, first-hand details. It's been widely acclaimed, and for good reason. It’s less about the personal drama and more a deep-dive into the financial delusion, which, as we're about to find out, is even wilder than the drama. Michelle: I’m ready for it. A story this big, you need a financial map to even understand the wreckage. Mark: And to understand the delusion, you have to start at the absolute peak. Picture this: January 2019, Los Angeles. The company is about to be valued at $47 billion dollars.

Michelle: Forty-seven billion. That’s a number that doesn’t even feel real. What was happening to justify that? Mark: That’s the billion-dollar question, isn't it? What was happening was WeWork's Global Summit. This wasn't some stuffy corporate conference. This was a three-day festival of excess at the Microsoft Theater. The co-founder and CEO, Adam Neumann, bursts onto the stage like a rockstar to the sound of "I'm on Top of the World." Michelle: Of course he did. It’s always a warning sign when the CEO has walk-on music. Mark: The book describes it as pure spectacle. He announces a new billion-dollar investment from SoftBank, which is what pushed them to that $47 billion valuation. And then the party really starts. We're talking appearances by P. Diddy and Ashton Kutcher. A private concert by the Red Hot Chili Peppers. Michelle: A private concert? For a real estate company? Mark: Oh, they were so much more than a real estate company, Michelle. They were a "community company" on a mission to "elevate the world's consciousness." That was the official line. And to celebrate that mission, they rented out all of Universal Studios for their employees for a night. Free-flowing booze, all the rides to themselves. The whole summit cost about $10 million. Michelle: That is absolutely bonkers. Okay, but here’s the part my brain can't process. How much money was the company actually making? Mark: That's the punchline. They weren't. According to the book, at that exact moment, WeWork was losing, on average, more than $3,000 every single minute. Michelle: Wait, hold on. Let me get this straight. They are burning through thousands of dollars a minute, and they decide the best use of capital is to spend ten million dollars on a party with the Red Hot Chili Peppers? Mark: You're starting to see the logic of WeWork. It was a reality distortion field, and Adam Neumann was its master. He wasn't selling office space; he was selling an idea. He preached that WeWork was about "making a life, not just a living." He was building a movement. Michelle: That’s a great story. But you still have to pay rent. How did he convince some of the smartest investors in the world to ignore the fundamentals? What was his secret? Mark: The book argues his secret was that he was, first and foremost, a world-class salesman. It goes back to his very first venture, long before WeWork. He tried to launch a company called Krawlers. Michelle: Krawlers? What on earth is that? Mark: Collapsible baby clothes with built-in knee pads. Michelle: You’re kidding me. Baby knee pads. Mark: I am not. He was convinced this was his ticket to becoming a millionaire. He dropped out of college, flew to China to find suppliers, and hit the trade shows. And the business logic was... questionable. Babies only crawl for a few months. But Neumann could sell it. His slogan was, "Just because they don’t tell you, doesn’t mean they don’t hurt." Michelle: Oh, that is some emotionally manipulative genius right there. He’s selling a solution to a problem parents didn't even know they had. Mark: Exactly! He had this incredible charisma. He could make you believe in the vision, whether it was for baby knee pads or for a global community that would change the world. He was selling the feeling, the story. And for nearly a decade, in a market flooded with cheap money, that story was worth more than profits. He convinced investors that WeWork wasn't a real estate company subject to normal math; it was a tech company, a physical social network, that deserved a tech valuation. Michelle: So it’s like he was selling the sizzle, but the steak was just... a desk and a chair. And for a while, everyone was so mesmerized by the sizzle they didn't even ask to see the steak. Mark: A $47 billion sizzle. But eventually, every company, no matter how great its story, has to show its math.

Michelle: Okay, so he's a master storyteller. But eventually, the story has to become a spreadsheet, right? Especially when you decide to go public and file for an IPO. How did that go? Mark: It went, to put it mildly, catastrophically. In August 2019, WeWork released its S-1 filing, the document companies have to file with the SEC before an IPO. And the entire financial world read it and had a collective meltdown. Michelle: What was so bad about it? The losses? Mark: The losses were staggering, yes. But it was more than that. The document was a monument to hubris and corporate-speak nonsense. It opened with a dedication "To the Energy of We." Michelle: To the Energy of We? In a legal financial document? Come on. Mark: It gets better. To hide the massive losses, they invented their own metrics. My personal favorite, which the book details, was "Community-Adjusted EBITDA." It was basically their profit calculation, but they just decided not to include normal business costs like marketing, administration, and even design and development. Michelle: Wait. So it’s like me calculating my personal savings but deciding not to count my rent, my food, or my car payment. It’s a completely imaginary number! Mark: Precisely. It was financial fantasy. But the real bombshell was the section on conflicts of interest. The S-1 revealed that Adam Neumann had been treating the company like his personal piggy bank. He was borrowing hundreds of millions from WeWork to fund his lavish lifestyle. He was buying properties and then leasing them back to WeWork, making money on both ends of the deal. Michelle: That just feels so brazen. It’s one thing to have a vision, it’s another to be actively siphoning money from your own company that you're about to ask the public to invest in. Mark: The most unbelievable part, for me, was the trademark. Neumann had personally trademarked the word "We." And then, right before the IPO, he had The We Company—his own company—pay him $5.9 million for the rights to use the word. Michelle: Hold on. He trademarked one of the most common words in the English language and sold it back to his own company for almost six million dollars? That's not just hubris. That's a level of audacity I can't even comprehend. Mark: The public backlash was immediate and brutal. The media dubbed it the "S-1 Shit Show." The valuation, which had been floated as high as $65 billion at one point, plummeted. It went from $47 billion, to $20 billion, to maybe $10 billion. Investors were pulling out. The IPO was dead on arrival. Michelle: So the story finally crashed into the numbers. But what about the guy who enabled all of this? The biggest believer of all, Masayoshi Son of SoftBank? He’d poured billions into this. Where was he? Mark: Son was in panic mode. He had staked his reputation on Neumann, famously telling him he wasn't crazy enough and that WeWork should be ten times bigger. He had compared WeWork to Alibaba, his most legendary investment. Now, he was facing a colossal write-down. So, SoftBank had to step in with a bailout package to prevent outright bankruptcy. But that bailout came with a condition. Michelle: Adam Neumann had to go. Mark: He had to go. But he wasn't going to go quietly or for free.

Michelle: This is the part of the story that always gets me. The company is in flames, thousands of employees are about to be laid off, their stock options now worthless. What happens to the man who lit the match? Mark: He gets a golden parachute woven from platinum and unicorn hair. As the book lays out, to get Neumann to give up his controlling voting rights and walk away, SoftBank gave him a deal worth over a billion dollars. They bought his shares for hundreds of millions, gave him a massive credit line, and paid him a $185 million "consulting fee." Michelle: A consulting fee? For what? How to burn through $10 billion? That is just infuriating. He fails upwards on a scale that is almost unimaginable. Mark: It’s the ultimate moral of the story. The book closes by quoting F. Scott Fitzgerald's The Great Gatsby, and it's so perfect it gives me chills. "They were careless people... they smashed up things and creatures and then retreated back into their money or their vast carelessness or whatever it was that kept them together, and let other people clean up the mess they had made." Michelle: Wow. That hits hard. Because that’s exactly what happened. The employees, the smaller investors, they were left to clean up the mess. It’s a powerful warning, isn't it? It makes you look at the next charismatic, "visionary" founder who promises to change the world a little differently. Mark: It really does. It forces you to ask: Is this a real business, or is it just a really good story? Because the WeWork saga proves that a great story can build a $47 billion illusion, but it can't pay the bills. The bill always comes due. Michelle: And the fallout from this was huge. It really put a spotlight on the whole "cult of the founder" in Silicon Valley and the venture capital ecosystem that fuels it. What do you think? Is that culture still as strong as ever, or did WeWork serve as a genuine wake-up call? Mark: That’s the question that lingers, and I think the answer is complicated. For a moment, it seemed like a major correction. But the market has a short memory. The core elements—the hunt for the next unicorn, the allure of a charismatic leader—are still very much in play. Michelle: It’s a cycle. Which makes stories like this one, and books like Built to Lose, so important to remember. We’d love to hear what our listeners think. Is the 'cult of the founder' still alive and well? Find us on our socials and join the conversation. We're always curious to hear your take. Mark: This is Aibrary, signing off.