Mark Lennihan/AP Photo
Former WeWork CEO Adam Neumann
This article appears in the September/October 2021 issue of The American Prospect magazine. Subscribe here.
The Cult of We: WeWork, Adam Neumann, and the Great Startup Delusion
By Eliot Brown and Maureen Farrell
Crown
Power Play: Tesla, Elon Musk, and the Bet of the Century
By Tim Higgins
Doubleday
It was late, and you couldn’t sleep. You stumbled into the den and warmed up the television set. You could almost hear the smile of the man in front of you, and in the coldness of the night he sounded like the most rational person you’d ever encountered. You were not entirely sure why anyone would require a device that scrambled eggs inside the shell, but the man was so compelling, so funny, so forthright, so real, so loud, that you rang up one of his operators, who were standing by.
Millions of Americans had the same experience at some point in the past 50 years, convinced by the infomercials of Ron Popeil, who died this summer. Throughout his career, at state fairs or on your TV screen, Popeil demonstrated products that fell somewhere between slightly labor-saving and completely unnecessary, and sold them to a waiting public as the essential gateways to a more bearable existence. You weren’t just buying a Ronco Food Dehydrator, you were being given the blessings of time and comfort and possibility. You became the person you always wanted to be, for two easy installments of $19.95, plus a free gift.
Today’s titans of industry, the men—and they mostly are men—who have shaped modern business, are essentially Ron Popeil, minus his integrity. They are known as founders, a combination of inventor, CEO, showman, and cultural symbol. They sell the same dreams of a better life, although somehow, their lives are the only ones that materially improve.
But their audience is different from Popeil’s. Instead of insomniacs seeking refuge, today’s founders aim their pitches at investors, even while their products are ultimately consumed by the masses. If you can persuade a handful of people to part with billions of dollars, rather than getting millions of people to part with a few bucks, your product doesn’t have to be good or novel or even healthy.
How founders are depicted in their biographies depends on the relative success of the enterprise. The standard business tycoon profile has a trajectory, following the earliest stirrings of the founder through the on-the-precipice phase that exposes their pettiness, selfishness, and recklessness. This is where the books take a key turn. If the business implodes, the founders are scolded, denounced as liars and grifters, condemned for conning so many wealthy and important people. If the business thrives, however, the tone is respectful, with authors shaking their heads about the “wild ride” of a corporate savant, who’s only crazy in that way that visionaries are crazy.
And yet all these founders are the same. Their biographers’ value judgments hinge entirely on whether they get to keep running their companies, not whether they’ve hurt everyone close to them and have ravaged society. By hewing to this narrative, the authors pen the equivalent of tributes to serial killers.
I don’t think that’s overstated. The rock-star protagonists of three recent books—Tesla’s Elon Musk, Amazon’s Jeff Bezos, and Facebook’s Mark Zuckerberg—routinely preside over physical and emotional damage and even death. Their injurious behavior toward rivals, partners, customers, innocent bystanders, and democracy itself suggests that founders invariably border on sociopathy to be successful. Yet, as Brad Stone writes at the end of Amazon Unbound, his second book about the company, “it simply no longer makes sense to ask” whether the world is better off with Amazon in it. Its ubiquity, and that of the other corporate winners, justifies the ruthlessness.
Adam Neumann, protagonist of The Cult of We by Wall Street Journal scribes Eliot Brown and Maureen Farrell, is every bit as egotistical, hypocritical, and unlikable as his billionaire counterparts. The WeWork founder’s major sin was to rip off a similarly arrogant con artist, SoftBank’s Masayoshi Son, and promote the ridiculous notion that he could build a global empire with an office subleasing company. Neumann wasted other people’s money and showed cruelty to colleagues, but nobody died from WeWork, and nobody involved really suffered very much.
Yet Neumann is rebuked, because he failed. And if the implicit idea behind the rebuke is to teach a lesson about the profligate, mendacious ways of the modern economy, it’s hard to find anyone in corporate America taking it to heart.
In modern business, snake oil peddlers fail and succeed at random.
THE CULT OF WE, like so many of these business books, opens at the paradigmatic founder’s event: a theater stage where the founder (Adam Neumann) gets to act out his Steve Jobs fantasy of touting his creation to adoring fans and employees. At the time (2019), WeWork was losing $3,000 a minute, and would soon join the trash heap of other overhyped laughingstock startups. As the camera pulls back, Brown and Farrell bring into focus Neumann the man.
It turns out he’s a boring narcissist, wholly unworthy of book-length treatment. The penny-ante grifting, ostentatious wealth, pseudo-spirituality, desire for crowds of worshippers, hazy tequila and marijuana parties, and overwrought sense of self (at one point, Neumann, an Israeli, pronounces himself the right person to broker Middle East peace) are pure clichés. Maybe it’s his Kabbalah-obsessed failed actress wife Rebekah (Gwyneth Paltrow’s cousin), whose father created a nonexistent cancer charity and made off with all the donations, who has just enough off-the-charts amorality and self-regard (she claimed to be the secret to WeWork’s success because she picked the coffee in the offices) to merit a profile. Adam’s just a bro.
He’s also a bad businessman; his first company, which sold baby clothes with knee pads to protect crawlers, was a Popeil-like solution to a non-problem, which quickly fizzled. His only discernible talent is as a human divining rod, able to locate himself next to big pots of money and cajole the owners into parting with them. And even that isn’t so much a talent as it is the dumb luck to come of age in a deeply perverse time for American business. Investors today, fearful of letting the next Uber slip through their fingers, openly hunt for carnival barkers with a “near-messianic attitude” to trust with their fortunes. They value ambition over numbers, narrative over facts, fantasy over reality.
Leasing space in an office building for slightly more than the mortgage payment is a solid but unremarkable concept. Neumann instead framed it as a way to connect young professionals and build community, a Facebook in real life. It would take about three minutes to see through this absurdity; indeed, an internal study of WeWork members showed that they rarely socialized or even knew each others’ names. But founders were induced to “think big,” a euphemism for deceiving themselves about their investment’s impact.
Brown and Farrell capture well how every institutional investor has styled itself a venture capitalist these days, from big banks like Goldman Sachs and JPMorgan Chase to mutual funds like T. Rowe Price and Fidelity. This has created a cycle that inflates founders’ instincts to scale up and ignore economic sustainability. Feeding Neumann even more was Masayoshi Son of SoftBank, a guy who made one good deal in his life (with Alibaba) and parlayed it into a self-image as ludicrous as those he funded. Son invested over $4.4 billion in WeWork after a 12-minute tour of its headquarters in New York, and constantly pushed for faster growth to build up valuation.
“Being crazy is how you win,” Son told Neumann. Nobody needed that advice less than the hulking Israeli.
Neumann embarked on a high-level Ponzi scheme, losing money on each round of investment but renting enough new offices to attract more investors. The ancillary businesses that were supposed to yield tech-unicorn profit margins for Neumann were just wild lunges in every direction. WeWork bought a wave pool company, opened a gym and an elementary school, pitched a Shark Tank–type television show, and invested heavily in a nondairy coffee creamer company founded by Neumann’s friend Laird Hamilton, the famous surfer.
He also used much of the investor loot to tend to his true passion: being impossibly rich. He repeatedly cashed out shares at higher valuations, borrowed from banks that sought business with WeWork for his personal use, and even made the company buy trademarks related to the word “We” from him for $5.9 million. He bought several stakes in WeWork buildings, becoming owner and renter simultaneously. This personal enrichment funded numerous cars and homes, including one with a recording studio shaped like a guitar.
All along, Neumann preached the concept of togetherness while zealously preferencing his own enrichment. This communitarian had a special exit designed for his office so he didn’t have to see anyone while leaving.
It all blew up when SoftBank suffered an ill-timed stock dive, obliterating a $20 billion buyout proposal. WeWork would have to go public to find capital, which quickly turned disastrous as the unviability of its business model, and the hypocrisy and self-dealing of its founder, were exposed. Neumann was forced to step down, but not before negotiating a $1 billion payout, effectively a ransom to stop hurting WeWork. SoftBank stiffed Neumann on the cash, and after a lawsuit he got about half. There are no heroes here.
Brown and Farrell, who covered WeWork for the Journal, are part of the story. They broke several damaging scoops during the time when WeWork floated its IPO; the negative coverage crushed Neumann’s effort. Similarly, John Carreyrou’s reporting, also for the Journal, revealed the fictions behind blood-testing juggernaut Theranos, and his excellent book Bad Blood cannot help but place himself at the center. While Brown and Farrell are more restrained than Carreyrou, they tinge The Cult of We with healthy doses of morality, highlighting Neumann’s “chaotic approach” and railing against a business culture that would elevate such a hot mess. “Optimism supplanted critical thinking,” they conclude. “As this recipe of poor corporate governance spread virally, it made a WeWork-style disaster inevitable.” But because they drove the narrative in real time, their conclusions infect its retelling.
Jae C. Hong/AP Photo
Tesla’s Elon Musk and WeWork’s Neumann share many similarities; the main difference is that Musk got to keep running his company.
EVERY CHARACTERISTIC THE AUTHORS decry in Neumann, and the business culture around him, can also be discerned in the breakout successes of the 21st century. In Power Play, Tim Higgins (yet another Journal reporter) paints a portrait of Tesla’s Elon Musk that has disturbing resemblances to Neumann’s.
For example, WeWork wasn’t really Neumann’s idea; he took it from a college classmate’s co-working company. And Tesla wasn’t Musk’s idea; he was brought in because he had cash from eBay’s acquisition of PayPal, where he’d been thrown out as CEO. Miguel McKelvey, WeWork’s co-founder, did most of the company’s early work; J.B. Straubel, an engineer whose genius shines in Power Play, really created Tesla by figuring out how to organize the lithium-ion battery drive train so it wouldn’t constantly catch fire.
Before its IPO, WeWork suffered from dodgy accounting and a lack of budgetary control. So did Tesla, which for a long time didn’t track the costs of the parts that comprised the car, and mixed in customer deposits on vehicles with operating cash. Musk, like Neumann, constantly overhyped his product, lying to investors about production numbers, profits, and available cash, missing goal after goal. Musk, like Neumann, got personal loans from the banks that did Tesla’s IPO to fund his lifestyle. Musk, like Neumann, would announce new initiatives that his company was wholly unprepared to pull off, micromanage the slightest details, scream at subordinates, and fume at employees and the media for problems caused by his spur-of-the-moment whims. Musk, like Neumann, would jet around the world for parties and indulgences, leaving the actual work to underlings.
A rare crossover moment in The Cult of We has Neumann meeting Musk in 2017 to pitch him on building community on Mars, which Musk dreamed of colonizing. Both embody a startup founder’s archetype of the audacious, lunatic-fringe leader who “doesn’t need sleep” and pushes staff to their limits. A major plot point in The Cult of We concerns Neumann leaving a bag of pot on a private jet parked in Israel; in Power Play, it’s Musk smoking a joint on Joe Rogan’s podcast. Ultimately, what they shared was a self-centeredness masquerading as vision.
It’s also not hard to envision a world where Neumann is triumphant and Musk is looking for his next gig. If the tech slump had hit SoftBank just a little bit later, Neumann would have secured his $20 billion deal and would never have needed to go public. He might have ridden the pandemic-era tech company wave to become even stronger. For its part, Tesla was on its deathbed multiple times in Higgins’s narrative. It blew through four CEOs in a year during the 2008 financial crisis, and at one point had less than a week of payroll on hand. It had dwindling reserves in 2012, and its stock lost half its value at the beginning of 2019. Even today, demand is falling in China, a key market for sales growth, as domestic automakers undercut Tesla’s sales.
Any one of these moments could have sent Tesla into cardiac arrest. It was bailed out by Musk’s success at creating the first meme stock, inspiring such evangelical fervor among supporters that he could guarantee retail investor support no matter what—and by the company’s ability to sell emissions credits to rivals, thus turning losses into profits. In other words, Tesla survived thanks to the state of California’s clean-air regulatory policy, which, considering Musk’s Randian libertarianism, brings a chuckle.
Yet Higgins never calls Tesla a cult or a delusion, which is how Brown and Farrell term WeWork. At every peak of the Tesla roller coaster, Higgins notes its “massive achievement.” But there’s nothing separating Tesla’s fate from WeWork’s, other than a few strokes of luck. A classic example of the tonal bias involves a solar roof demonstration at Universal Studios in October 2016, which Musk intended to save his struggling SolarCity business. “None of the solar panels actually worked, but that was beside the point,” Higgins writes. “Musk promised to make roofs sexy.”
AMAZON UNBOUND AND AN UGLY TRUTH, profiles of Jeff Bezos and Mark Zuckerberg, respectively, find those founders at a different part of the business life cycle, once they’ve broken free of competition and scaled an unassailable mountain. The books do address how Amazon and Facebook react to this new reality, where their missteps are magnified and their impact on the world debated. Even so, the similarities between these founders and their scrappier counterparts predominate in these narratives.
All four of these CEOs, at one point or another, structured shares to give themselves greater control of their companies. Even after becoming the world’s richest man, Bezos had his legal department quietly ask shareholders in 2019 if they would support a dual-class stock arrangement that would concentrate his voting power, weeks before he announced his divorce from his wife MacKenzie. This enabled him to retain control even as the split diluted his corporate stake. Despite preaching openness as much as Neumann, Zuckerberg limited access to his own Facebook account. The pettiness between Musk and Bezos over their respective rocket ship companies is palpable, and Bezos’s plan for a trillion people living on space stations is every bit as deranged as Neumann’s thinking he could build a $10 trillion company out of subleasing.
Despite being armed with limitless riches, Amazon’s major innovations in the past several years were either failures (the 3D Fire Phone, an insane idea for a desk lamp that projected holograms) or outright purchases like Whole Foods and Alexa (the latter was only realized after Amazon bought a speech translation and an AI company). Amazon Go stores with their smartphone checkouts were a perfect Ron Popeil product; exactly how taxing is a two-minute line at a convenience store? And that sounds like the Model T compared to Zuckerberg’s virtual reality headset for business meetings, because who hasn’t longed to replicate the worst part of the workday while wearing an oversized helmet and interacting with a cartoon version of Ken from accounting? Reading the travails of two of the most successful companies in the world, you get the distinct impression that they’re just throwing darts at a board, sustained only by their prodigious wealth, their ability to muscle out competitors, and their deceptions, be it Facebook lying about its reach to advertisers or Amazon lying about ripping off data from third-party sellers to boost its own products.
Facebook almost died when Zuckerberg rejected a buyout from Yahoo in 2006, and Amazon had a near-croak experience after the 2001 dot-com crash, rescued only by an infusion of cash from AOL. Otherwise, they might have joined WeWork as footnotes. Unfortunately for the world, Bezos and Zuckerberg’s companies survived and, like Musk’s, grew big enough for their inventions to kill people.
Musk’s bravado carried over into Autopilot, a driver assistance mechanism which the founder had to admit recently is “not great,” seven years after rolling it out. Unfortunately, Teslas on Autopilot have a bad habit of slamming into emergency vehicles that are assisting other crashes. Yet for years, Musk obstinately refused to walk back his claims for his self-driving robot taxis, even as his fans were careening to their deaths. As for Amazon, pedestrians have long been at risk from the company’s onrushing, overworked delivery drivers late for getting soda and toilet paper into front yards. During the pandemic, Amazon warehouses became coronavirus contraction factories, with over 20,000 cases as of last October. And two years earlier, ethnic Rohingyas in Myanmar were wiped out by foes directing their genocide through Facebook posts.
But Bezos and Zuckerberg made it, and dug their moats to ensure nobody can catch them. Musk is on the way. Neumann, a garden-variety thief, only took from investors who knew the risks. Yet he’s a bad person, which is another word for someone whose con didn’t work.
A fast-growing company collapsing to Earth amid the hubris of its founder can be depicted as an updated Greek tragedy. But in modern business, snake oil peddlers fail and succeed at random. The system that keeps lionizing fraud for profit needs the scrutiny, but instead we get locked into myopic narratives. What’s more, the cautionary tales don’t come close to dislodging the business world’s longing for the next big idea.
As Elizabeth Holmes faces trial for fraud, investments in health care startups have jumped, with venture capitalists making a frenzied search for the next medical savior. Meanwhile, the guy who founded Diapers.com wants to build his own utopian five-million-person city named Telosa (from the Greek for “highest purpose”) somewhere in the American scrub brush. Even WeWork, sans Neumann, is back, latching onto the newest form of financial engineering, a special purpose acquisition company (SPAC), to go public two years after its IPO failed.
Somewhere, Ron Popeil weeps. At least he made a half-decent knife.
