Capitalism is nothing without its myths. The fable of the invisible hand has spawned a set of stories about how things are supposed to work. We are meant to believe that the best rise to the top; that private enterprise is the most efficient way to deliver the products and services we rely on; that the wealthiest among us have the greatest moral claim to deciding how resources should be allocated. Above all, we’re asked to put our faith in the promise of entrepreneurship. Even when entrepreneurs appear to be more motivated by self-interest than the common good, the invisible hand will purportedly ensure that their brilliance redounds to the benefit of us all.
Sometimes, though, the myths fall apart. Enter WeWork, the commercial real estate company headquartered in New York City, and the most prominent subsidiary of holding company ‘The We Company’. Despite being practically anointed for success by the world’s wealthiest venture capital fund, WeWork failed to meet even the measly thresholds of success set by capital itself. Ever since the formerly secretive company filed for an initial public offering last August, everything has gone horribly wrong.
Investors balked at the company’s numerous financial red flags: its severe unprofitability, its bizarre accounting methods, and co-founder Adam Neumann’s shady mechanisms for extracting wealth from the company by, for instance, trademarking the word ‘We’. Since then, the company has delayed its IPO indefinitely, laid off a sixth of its global workforce of 12,000, and removed Neumann as CEO. (His exit package is reportedly worth over a billion dollars.)
WeWork’s sudden demise may seem startling, but it’s not that surprising given the speed of its rise. Propelled upward by its easy access to VC cash, WeWork came out of nowhere to become a real estate behemoth in less than a decade. Since its founding in 2010, the company has raised about $20 billion in a mix of equity and debt, and its last fundraise in early 2019 saw it valued at $47 billion. Its global portfolio of managed buildings is massive — with several square million metres under its control, it is the largest commercial landlord in New York City, and the second largest in London, after the UK government.
And now it’s imploding. Despite being showered with billions of dollars, despite being lauded by the press for their innovations, despite the best strategic wisdom that money can buy — WeWork is now widely considered a failure. The company’s scandals are so outlandish that they’re about to be dramatised in a television series: the nepotism, the frat-boy culture, the stunningly obvious data-driven ‘insights’, all wrapped in meaningless platitude about elevating the world’s consciousness.
But as engrossing as these details are, it would be a mistake to let the soap-opera details distract us from the broader narrative. WeWork is not a unique case of hubris and greed — it speaks to the fragility of the apparatus of venture capital as a whole, calling into question the entrepreneurial myth that legitimates contemporary capitalism. Ultimately, the rise and fall of WeWork is an indictment of our economic system.
Privatising the Future
To understand how WeWork came to be, we have to go back to 1981, with the founding of Japanese holding company SoftBank by businessman Masayoshi Son. Though the company began with an unassuming mandate as a computer parts store, the intervening decades saw it expand beyond its founder’s wildest dreams. Early success in the domestic telecommunications industry led to investments in various technology companies, including an early stake in Chinese e-commerce company Alibaba that later proved astronomically valuable.
In 2017, SoftBank’s forays into technology investment culminated in a venture-focused private equity fund, financed partly by SoftBank and partly by partners like the sovereign wealth fund of Saudi Arabia. With nearly $100 billion in assets, and headed by Son himself, the SoftBank Vision Fund dwarfed every comparable investment fund. Unsurprisingly, it soon entrenched itself in the startup ecosystem as the deep-pocketed investor behind money-losing companies like Uber and WeWork.
It can be hard to make sense of Son ploughing so much money into companies that themselves acknowledge they may never turn a profit. The VC model was originally meant for businesses able to scale quickly and profitably — usually with the help of software margins — yet SoftBank keeps investing in companies with minimal software components and terrible financials. Why is this? Aren’t capitalists meant to be driven by the desire for a return on investment? But structural incentives are only part of the picture. When you’re in control of this much money, the prosaic need to achieve returns can take a backseat to the egotistical need to do something with that money. The point of amassing control over all this money isn’t just to make more money – it’s to exercise power. Son has built an investment empire in order to shape the future.
Luckily for us, Son has been quite candid about his vision of the future. A SoftBank presentation by Son in June 2011, which sketches out a roadmap for the next thirty years, is quite telling. Despite the numerous paeans to ‘revolutionary change’ and ‘happiness for everyone’, SoftBank’s real vision is one that prioritises happiness for a select few — primarily, its own shareholders. The slides predict epoch-making technological advances in fields like augmented reality, robotics, and brain-computer interfaces, with SoftBank swelling to trillion-dollar heights on the back of an information revolution. It’s a grim juxtaposition: even as SoftBank imagines a future filled with inventions that would change the way we live, its vision would trap us in an eternal present – a world of further concentrating wealth in a corporate-owned dystopia.
There’s a strange irony here. SoftBank’s vision takes technological change as a given, but never acknowledges the possibility of political change. And yet, SoftBank persists in funding companies that make the world so unliveable for so many people that political change feels inevitable. Gig economy companies that promise riches but instead trap workers in cycles of poverty and misery; real estate companies that profit from the increased unaffordability of housing; robotics companies that aim to automate jobs and direct the cost-savings towards capital — SoftBank has quite a knack for picking companies whose rapaciousness threatens the tenability of the status quo. Its investment strategy is the venture capital equivalent of ‘monetising the rot’.
In this context, it’s not surprising that Son put so much faith in Neumann’s hapless WeWork. WeWork’s almost comical dearth of actual innovation doesn’t even matter – for SoftBank, the technology is beside the point. The end goal is to gain control over the way the world works, and Neumann was evidently a willing partner in that endeavour. Many of the media exposés of WeWork have credited Neumann as being a terrific salesman, one who was just eccentric enough in his personal habits to leave people convinced that he was a visionary (like his proclivity to go without shoes). In other ways, though, Neumann isn’t eccentric at all; his dynastic aspirations of endless corporate expansion are quite banal, par for the course under capitalism. Far from being ‘visionaries’, both men are aligned in their deeply conformist vision of a world that is increasingly owned by the corporate elite.
Stories like WeWork fundamentally undermine the entrepreneurial narrative that is so foundational to modern capitalist ideology. Every time someone like Neumann manages to walk away with a golden parachute while employees are laid off with scant severance or downgraded to contractor status, every time a startup is catapulted to billion-dollar heights despite minimal technological innovation and questionable social value, it becomes harder to justify the outsize rewards that accrue to these would-be innovators.
The problem with our current model of venture-backed entrepreneurship is that it selects for qualities like charm and salesmanship and the desire to dominate, while paying little heed to talent or ability — let alone social responsibility. Such an environment fosters the growth of ambitious companies capable of scaling quickly; it is also prone to grifters, charlatans and outright sociopaths. People who master the trappings of entrepreneurship, who say all the right things to attract investors and employees, can rise to the top despite producing little in the way of social value. The more our society treats net worth as a proxy for success, the more it’ll attract entrepreneurs in pursuit of little more than easy money and the thrill of the game.
Much ink has been spilled over whether SoftBank-backed startups that lack traditional software margins will ever turn a profit. But in a sense, who cares? WeWork might well become another Webvan, the SoftBank-backed failed grocery delivery startup from the dotcom era; or it might eventually reach the promised land of profitability, as Amazon did. There are historical precedents for either possibility. WeWork’s economics may be questionable, but it’s not impossible to imagine The We Company achieving its aims: WeWork and WeGrow and WeLive could grow to encompass every aspect of society, so that merely existing in the world necessitates paying a tax to a corporation led by a barefoot plutocrat.
The question we should be asking isn’t whether WeWork can ever attain profitability. The question we should be asking is whether that’s even desirable. Stock market analysts may content themselves with the former, but the latter is what should concern anyone who values social good above profit. It’s a question of whether we want to live in a world dominated by the cold logic of capital, where all our communal goods have been privatised for the benefit of unelected oligarchs.
We could move in another direction: away from our reliance on shambolic private corporations and their untrustworthy founders, and towards a democratic model for coordinating production. We could have better public services, free at the point of use and funded by progressive taxation. We could have more worker cooperatives, and non-profits, and even goods produced outside the purview of the market. We could have a whole host of institutions that are actually designed to serve the people who use them, replacing our current panoply of predatory tech-adjacent startups run for the benefit of callous investors.
In the meantime, we live in WeWork’s world. Startups will continue to raise colossal amounts of money to fund spurious endeavours, and gig workers will continue to sleep in their cars to make ends meet. Financially dubious companies like WeWork will trundle along — and disgraced executives like Neumann will be reprimanded not for the predatory nature of their business models, but for being insufficiently careful with their investors’ money.
Maybe the WeWork saga has a silver lining: in demonstrating the utter senselessness of our current system, it makes us more likely to yearn for an alternative. Rather than individual greed, we could orient our economy around the good of the collective – the kind of ‘we’ that can’t be trademarked.