First Published in Nov, 2019 on LI

It’s been a while and I know by now lot of ppl are already aware of the WeWork drama.

For the un-initiated, WeWork, one of the darling unicorns in the US and just a couple of months ago privately valued at $47B saw its IPO ambition crashed when the public investors freaked out buying its shares for even under $10B valuation.

Consequently, IPO was cancelled, CEO was forced out of the company and even the Board seat, and around 4000 employees to be laid off with their equity becoming worthless.

By now, almost everyone knows about the self-dealing Adam Neumann, WeWork erstwhile CEO and founder did. Using the investors money to buy real estate properties in his name and then renting out to WeWork, charging his own company to pay him $6M for using the brand name “We”, which he co-incidentally owned, cashing out $700MM of his equity before the IPO, flying in G650 private jet smoking marijuana all the time while the company burnt billions everywhere….yada yada. You know the details.

Most ppl by now if not before, have also come to realize how WeWork was essentially running a “no-business model” self enriching scam, where the revenue growth was shown under the guise of selling $1 for $0

But why did WeWork collapse and how many “famous” investors and ppl around the world couldn’t foresee it the way it happened?

This brings back to more than 2 years ago. On one weekend, I was sitting in my apartment about to send an email to a bunch of friends on the far end of the world, on a product idea that I accidentally came across a news on WeWork online.

Until then I had heard of WeWork but never paid that much attention.

I was intrigued by the article. Little did I realize the article would make me spend the next two hours googling on WeWork and its CEO Adam Neumann.

I researched about its “business model”- leasing long term from landlords and sub-leasing it short term to individuals and small businesses. It was a pure leasing arbitrage play.

I watched Adam Neumann speak in couple of interviews. What he spoke, how he spoke.

I heard him extravagantly use the word “tech” many times and on occasions he was not talking about WeWork being a tech company, he would talk about his mission-

“Elevating the world’s consciousness”

I read and watched all of that.

After 2 hours, I sent an email to my friends- “WeWork is a scam”.

I however didn’t talk about it publicly until I realized the water has gone overboard. A year ago, far earlier than the current drama and before most of the ppl had any issues or concern with the company or its CEO, I first wrote on Linkedin openly where I stand on WeWork.

Little did I know that “collapse” and CEO “would have still enrich himself” would turn out to be so prophetic one day. As we know, Neumann still ended up making close to $2B even after his ousted.

Over time, I started becoming more vocal on this to highlight the actual reasons underlying all this- most VCs running a ponzi investment thesis seeking a Greater Fool.

As usual anything that has some remote connections to Silicon Valley would always have ppl taking issues with your point.

I was told “what have you done”, “You are not rich that we listen to you” or the usual “Amazon story” analogy.

I was used to all this and even worse as around that time, I also started writing about Tesla. A far bigger cult, where Musk’s fanbase is even more vocal and angry if anything is said against the company or its CEO.

A year went by and we all know what happened with this story and how it unfolded.

Now I hear many in Silicon Valley nonchalantly calling it obvious as WeWork had huge losses.

Well, everything is obvious in the hindsight.

But what many miss is that WeWork IPO collapsed not because of its losses. None of the last decade’s companies have made any profit or positive cash flow. Uber, Lyft, Slack, Peloton. But it didn’t stop them from going to IPO even though the IPO ended up in downward slide. But they could still go IPO.

WeWork IPO didn’t collapse because of its losses. It collapsed because of its CEO

There is a belief in Silicon Valley, especially the VCs- Back the founders. Founders who are hard-working, passionate, as there is a confidence that hard-working, passionate founders will hustle their way to make their idea a success.

In some ways it’s not wrong. After all, from the seed of the idea to germinating it into a full-fledged grown up business, it does require hard-work and great passion in your conviction.

However what many VCs miss is that its not the hard-working, passionate founder that makes it. Its an honest, hard-working, passionate founder that you should be rooting for.

When I looked into WeWork a couple years ago, I didn’t have access to its numbers. I didn’t know how much it makes, how much it loses.

While I used my sense on realizing how this leasing arbitrage is going to fare out in long term, the biggest signal I learnt was by watching Adam Neumann talk.

I realized Neumann is running something I like to call as Perception Hack.

Failure is not a bad thing. I fail a lot. Failure itself can be quite a life-long lesson. Ppl who make an honest attempt for something can fail. It’s a good thing.

But failing because you not only make a dishonest attempt but then use that to create a charade and perception to public should be condemned.

Perception Hack is when you “hack” a perception of saying something which is completely different from the actual reality.

Most of us come across this all the time. Perception Hack is the main Signal you need to look for in anyone in life. Whether interviewing someone for a role in your team or meeting someone for relationship.

But whatever is being spoken, said was all out in open for everyone to see. Then why many people miss to see Perception Hack in someone?

This brings to one of the biggest lesson I learnt on human behavior last one year

Most ppl want someone to tell them what to think

For the past one year, I have felt disappointed, sad and indignant when I would see normal ppl being taken for a ride. I would write about it. But most would unfollow me because contrarian things are seldom liked by majority. I would get comments like “attention seeking whore”, “garbage write-up”.

I realized, People want an “authority” to tell them how to see things correctly, how to value things. But they choose this “authority” not based on facts or results. They choose this “authority” because it seems authoritative.

Because someone is rich. Someone appears to be famous.

And I have never been rich.

All I had known since childhood was

Never look up to anybody in life. Never look down on anybody.

Looking upto to somebody makes you biased. Instead of using your own sense, logic to understand what is the right thing, looking upto to somebody starts interfering in your own sense of seeing things.

Looking down on anybody makes you disappointed when you feel they don’t meet your “expectations”.

I have always believed that if you are smart, educated and have the right heart, you don’t need to believe what someone else tells you to believe. You are all that is needed to know whats the right thing. But still people stop using their own sense and end up trusting someone who “appears” more expert in things. Why?

Bayesian Statistics teaches few very important philosophy of life.

Before that, to the uninitiated, Bayesian Statistics tells you to come up with a prior belief on something. That belief is based on your own subjective exp and is before you see the data. Then it throws you the data and asks you to update your belief which is called as the posterior belief.

But it teaches very interesting philosophy in life:

• Humans are inherently Bayesian. When you decide to cross a road estimating the time it might take for an incoming car to reach you, you are doing Bayesian Analysis.

• However, unlike a typical Bayesian Stats where if the data becomes more, your prior belief doesn’t matter then, humans hold onto their prior beliefs more strongly than any good data you throw at them.

• This brings to my most important lessons I learnt last one year-
  

Good data does not make for better decision making models for humans.

Machines are different. They go by data and change their beliefs what good data tells them.

Humans are not. No matter how good data you throw at them, ppl go with their prior beliefs ignoring all facts, logic.

Faith triumphs Facts for humans contrary to what machines do.

And that’s why Artificial Intelligence is not a threat to humanity. Natural Stupidity is.

Do I feel angry at Adam Neumann? I actually do not.

Adam Neumann spotted a VC bubble created by Softbank’s Masa. He realized Masa is a snake oil salesman inflating his own stakes in companies to support other debt in his empire. He just out snaked him in con-manship. He didn’t loot public, though he was about to if the IPO had gone through.

So I am not angry. I just feel sad. I feel sad for the employees whose hopes and dreams of making it after years of hard work and sacrifices got stolen in a matter of weeks.

A company is nothing but the fruit of labor of all hundreds and thousands of ppl working to build a great product. I feel sad when that fruit is mostly eaten by select few and the rest hard-working employees are left to pick the leftover of the rotten scraps.

This is not how Capitalism is supposed to be. This is Capitalism gone wrong.

Capitalism itself is not a bad thing. It is in fact a good thing. Capitalism helps create businesses, jobs, fuels the economy, helps everyone flourish. Capitalism pushes the nation and the human race forward.

But Capitalism where only a select few benefit at the cost of thousands of others is Capitalism gone wrong.

And that’s a bad thing.

Capitalism is also gone wrong, when someone claims to find issues in its current form and tries to "seemingly" talk about addressing them,

but ironically decides to not acknowledge or call out the bad actors in the current system.

That’s like saying, I know the current cancer is bad for the body, but the tumour which exists is great!

If Masa Son slapped all hard working honest entrepreneurs by “rewarding” someone of $2B for all this and telling these hard working founders that they have been doing it all wrong, Benioff mocked all the employees of WeWork who not only see their equity become worthless, but now face the possible guillotine of job loss.

This is Capitalism gone wrong.

For Masa at least he is now realizing that the biggest signal he missed as a VC in this story is the “Perception Hack”. At least thats the lesson he claims to have learnt now.

However I am not sure, if he has still learnt not to conflate future investors with “hypothetical” scenarios like the slide from his current deck while pitching Vision Fund II to investors.

I am sure many ppl in this story either part of or watching from outside would have learnt a few lessons.

If there is one lesson you should take away from this story, its that:

Nobody knows more than you in life if you follow facts and have a right heart.

Have faith only in yourself. Every one else is riding on their own self-bias

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