The Cult of We: WeWork, Adam Neumann, and the Great Startup Delusion

PROLOGUE

The Summit

THE CROWD FILLING THE MICROSOFT THEATER IN DOWNTOWN Los Angeles buzzed with anticipation. Technicians in the control room readied cameras and then unleashed a kaleidoscopic array of spotlights that lit up the theater—the same one used for the Emmys. The roughly five thousand attendees began to rise from their seats, cheering and clapping their hands to the beat of a pulsating pop song.

Adam Neumann emerged.

Wearing a light blue button-down shirt with sleeves rolled up, black pants, and white sneakers, the high-octane thirty-nine-year-old jumped up and down with his hands outstretched, beckoning people to continue clapping. The crowd erupted. Some of the eight cameras that sprang into action put his face up on a giant screen behind him. If strangers had stumbled into the auditorium, they could be forgiven for mistaking Neumann for a talent show contestant, or perhaps a televangelist. He walked toward center stage pumping his fist.

It was January 8, 2019, and most of the youthful crowd was the staff of WeWork, the massive office space startup Neumann had co-founded nine years earlier. Neumann, six feet five with a mop of shoulder-length dark brown hair, had summoned most of the company’s employees from around the world for a three-day confab called Global Summit. New recruits and veteran executives alike were tasked with soaking up a cascade of presentations extolling the company’s virtues and its extraordinary growth. How WeWork was about people taking part in “something greater than themselves,” as the company’s Israel-born co-founder often preached. How WeWork rental office space was about “making a life, not just a living.” How they were making the world a better place.

In standard parlance, it was a corporate retreat. But Neumann didn’t like to do things like other companies, even other startups. WeWork needed to be more. Everything had to be extreme—startup culture turned up to 11. This was a company that boasted free beer on tap in its offices and piped booming pop music into its avant-garde bathroom stalls. The Los Angeles summit was just one of two epic getaways held each year—the other being a music-fest-like event called Summer Camp. Five months earlier, WeWork had flown its global staff to the U.K., busing them to a giant field an hour and a half outside London for a long weekend of inspirational corporatespeak, capture the flag, and late-night dance parties.

The company wasn’t cutting any corners with its Los Angeles fete either. A day earlier, WeWork employees converged on Los Angeles International Airport, most of them traveling from the company’s New York headquarters. A caravan of coach buses shuttled the staffers east from LAX to downtown, where they filled thousands of rooms across nineteen separate hotels. To WeWork employees, it felt as if they occupied the whole downtown; you couldn’t walk outside without seeing someone wearing WeWork swag or a summit-sanctioned yoga class in an outdoor plaza.

The week ahead would bring a trip to Universal Studios, the entirety of which WeWork rented for a night, including the rides. Booze flowed freely, and a band played at a central square. Inebriated staffers soared around Hogwarts Castle on one of the Harry Potter rides.

Through the days, dull presentations on WeWork’s finances were broken up with lighter fare. Ashton Kutcher judged a mini awards show for promising small startups; a blizzard of confetti fell on the winner. Celebrities like P. Diddy and Jaden Smith popped by to watch or speak on panels. A Red Hot Chili Peppers concert served as the coda to one day of programming. Neumann’s wife, Rebekah, interviewed the lead singer, Anthony Kiedis, onstage. Their conversation hit on topics that included spirituality, addiction, pain, soul mates, and breast milk. During the show, Neumann danced in the front row and got into a tussle with security guards concerned with overcrowding.

It all cost roughly $10 million.

At other companies, the event and its price tag might have been seen as an extravagance. The CEO’s judgment and fiscal responsibility might have been questioned. But WeWork wasn’t concerned. After nearly a decade in business, the company wasn’t profitable—or anywhere close. It was losing more than $3,000 a minute, on average, and had lost more than $1.6 billion the prior year. But Uber, Airbnb, and the mattress website Casper were all unprofitable. Losses were par for the course for buzzy Silicon Valley companies.

Startups didn’t always grow and spend like this. But a decade-long deluge of money into Silicon Valley had established new cultural norms. Excess was in. For investors, it was the cost of doing business. The world was changing; entrepreneurs with giant vision needed room to grow and express themselves, they said. Rapid expansion was the goal, and these companies had plenty of that. They were building the future of the economy, and surely that future would bring profits.

Or so they hoped.

FAWNED OVER BY A STAR-STUDDED ROSTER OF INVESTORS, NEUMANN had managed to collect more than $10 billion over nine years, one of the largest investment hauls ever for a U.S. startup. Finance giants like Fidelity, T. Rowe Price, and Wellington were investors. Jack Ma, the founder of Alibaba; Steve Cohen, the hedge fund giant; Harvard University—they all had bet on Neumann. Wall Street was even more enamored: the CEOs of both JPMorgan and Goldman Sachs lavished him with attention. And Masayoshi Son, chairman of the Tokyo-based SoftBank Group and the most prolific tech investor in the entire world, had taken a particular shine to him, anointing Neumann the planet’s next great tech CEO. Admirers compared Neumann to Jeff Bezos or Steve Jobs—a business titan who could see around corners and would chart a revolutionary course.

The fund-raising conveyor belt had provided Neumann with the money not only for extravagant parties but also for constant, rapid expansion. By the beginning of 2019, WeWork had grown enormous, with 425 locations in twenty-seven countries around the globe. Its work spaces, with their instantly recognizable bluish glass-walled offices and common areas that looked like Brooklyn coffee shops, were rented to more than 400,000 people. Amazon, Facebook, and Microsoft were snapping up space from WeWork to house their own employees. Neumann’s obsession was doubling revenue every single year, a breakneck pace of growth that was far faster than the software companies to which Neumann liked to compare WeWork. It was faster than Uber. Faster than Airbnb. Even faster than Amazon nearly a decade after its founding. WeWork was going to grow bigger than all of them, he believed.

His own lifestyle mirrored his rising brand. A few weeks earlier, he’d taken the company’s private jet to Kauai, where he hit the waves with the surf legend Laird Hamilton. Neumann now pegged his personal net worth at $10 billion. He had seven homes, and a trail of support staff followed him everywhere, including a hairdresser and a stylist who had flown from New York to Los Angeles especially for the summit. He even stayed in a different hotel from the rest of the staff, holding court in Beverly Hills at the Peninsula hotel. Late the night before, he and aides huddled over beers in the hotel’s stodgy birch-paneled bar, finalizing some details around a deal for a new chunk of funding. They weren’t dwelling on WeWork’s growing red ink. The company’s fortunes were on the rise. Weren’t they?

AFTER GREETING HIS STAFF IN THE MICROSOFT THEATER—THE thousands present and roughly four thousand others watching from New York and offices around the world—Neumann told them he had an announcement. He paced back and forth on the stage, just as he did in private. Neumann would rarely sit still during a meeting.

As of early that morning, he declared to the room, WeWork had completed a deal for a new investment from SoftBank. The deal, which gave WeWork $1 billion in new cash, valued the company at $47 billion, he said, his voice rising.

That, he said, now yelling, “makes us the second-highest-valued private company on the planet.” As he finished the sentence, he thrust his left index finger in the air, holding it up as the crowd cheered again.

Neumann was obsessed with valuation—the worth of a company, as determined by its investors. He was adamant the $47 billion figure be at the top of the press release sent out that day. To him, valuation was a crucial marker—a testament to everything he’d built. The figure meant that WeWork was now second to just Uber among U.S. startups (contrary to Neumann’s declaration, it was also behind at least two Chinese startups and some older companies that had remained private). But it was worth more than scores of Fortune 500 companies like FedEx. It was worth more than Ford. A decade earlier, Neumann had been a struggling baby clothes salesman. Now he’d built a company worth the equivalent of United Airlines—times two.

The announcement was just the start. Neumann spoke for ninety minutes, meandering onstage and walking up and down in the aisles in the crowd, shaking hands with employees as a spotlight and cameras followed him. Often talking slowly for emphasis, he told the story of WeWork—of how it formed, where it was going, and how it was different.

“The technology companies, and social media,” he said, “made us promises of a better future, of a more connected future; the truth couldn’t be further.

“We’re disconnected.”

WeWork was the answer.

WeWork was “a community, a company, a family,” he said.

Its focus—caring about the community over the self—was going to drive WeWork further upward, he told the audience. It would become the model for other companies around the world to follow. It would be the basis for WeWork’s nascent expansion into other areas, too. He’d always seen WeWork as far more than just offices; it was a “community company” designed to bring people together, to erase boundaries between work and outside life. Now he wanted to make that loftier goal explicit. He was changing the company’s name.

“Moving forward: The. We. Company,” he said, pausing between each word for effect. WeWork would still exist, he said, but as a division of the We Company, which would have a far more expansive vision. The company’s mission, he said, was to “elevate the world’s consciousness.”

The work had begun in earnest. WeWork had started an elementary school overseen by Rebekah Neumann. Elsewhere, the company was creating dorm-like apartments for adults. In another endeavor, WeWork now ran its own coding academies to train people for tech jobs. The We Company would expand from here. The future appeared bigger, brighter, and unstoppable.

As he continued, Neumann mused of WeWork’s continued expansion—of its valuation climbing ever upward. Next year, he said, it would be $100 billion.

“That valuation we’re going to get—do you know what we’re going to do with that money? Elevate. The. World’s. Consciousness.”

Neumann made clear WeWork would be keeping up its blistering pace of growth, doubling revenue annually.

“Why am I not willing to grow less than 100 percent? Because we have a mission to complete,” he said.

As the crowd sat in rapt attention, Neumann expounded on the company’s future. It would expand throughout Africa; it would start its own TV show; it would hire military veterans en masse. The company was going to be even more devoted to helping the environment, and to doing the right thing in business. “If you do the right thing, you make the most money,” he said.

Left unsaid in all of it—what the mostly young, mostly idealistic employees didn’t grasp—was that $1 billion wasn’t going to get them very far. WeWork wasn’t close to making any money—any profit—at all. The massive growth that Neumann was talking about came at an extraordinary cost, putting the company deep in the red. To keep the machine running, WeWork would need billions upon billions of dollars to roll in again and again as the company grew.

But for nine years, Neumann’s funders—from venture capitalists in Silicon Valley to the Japanese conglomerate SoftBank—cared more about the growth than the losses. Their bet was that more funding would continue coming from somewhere. Someone else would believe in WeWork just as much as they did. The risk would be passed on to others.

Surely it wouldn’t be that hard.

PART I

CHAPTER 1

The Hustler

ADAM NEUMANN BELIEVED HE WOULD BE THE MAN TO REINVENT baby clothes.

It was 2006, and he was twenty-seven years old. Neumann was already running his own fledgling business that aspired to mass-produce pants and onesies with built-in knee pads for crawling babies. He named it Krawlers. Despite his sincere belief in the brilliance of his concept, Neumann was still hunting for ways to get the business moving, let alone to turn a profit. He flew to China to meet with suppliers. He pushed his product on baby retailers.

Neumann had arrived in New York from Israel in the fall of 2001, landing in a city reeling from the 9/11 terrorist attacks. Yet, in times of boom and bust alike, New York always beckoned dreamers like Neumann. His reason for the move, he told his friends, was simple. He wanted to get rich. New York was “where opportunity happens.”

He moved in with his younger sister, Adi, and lost no time making connections. Adi, a model who appeared on the covers of magazines including international editions of Elle, Vogue, and Cosmopolitan, brought in plenty of money to support a flashy lifestyle. The two shared an apartment, which doubled as Adam’s office, on the fifteenth floor of a building in Tribeca that attracted a gregarious crowd. Twentysomethings flitted in and out of one another’s apartments or socialized on the roof.

While Neumann had flirted with modeling himself—he had a distinctive look, lanky with long, flowing dark brown hair and a face marked by high, rounded cheekbones—he opted to pursue dreams of another sort.

Neumann had launched Krawlers while a student at Baruch, a public college in Manhattan known for its business program. The budding entrepreneur had tested out a string of business ideas, including a collapsible high heel, before eventually landing on padded infant clothes. Friends say he got the idea by seeing a similar product in Israel. He took to Krawlers with his trademark intensity, dropping out of Baruch to work on it full-time. He talked about how big the company would become—how they’d be selling millions of dollars of Krawlers clothes a year. He borrowed money from his sister, raised more from a wealthy hedge fund manager she was dating, and invested $100,000 he’d received from his grandmother.

Neumann knew little about children. He was young and single, and his time was dominated by working, drinking with friends, chain-smoking cigarettes, and churning through dates with different women. And the business logic of Krawlers had obvious holes: typically babies crawl for only a period of months.

Yet Neumann proved to be a gifted salesman, particularly when face-to-face with a potential buyer.

At trade shows where many of the clothes were sold, Neumann was a magnet for the small-business owners. His dramatic appearance, his booming voice with its emollient accent, and his vibrant energy stood out amid rows of infant clothing purveyors—so much so that a small crowd often huddled around him. He conjured a world in which a baby couldn’t be happy without built-in kneepads. He’d walk potential buyers through the experience of being a parent and having children crawl. Your child will love you more because of these clothes, he’d tell them, with a smile. The company’s slogan became “Just because they don’t tell you, doesn’t mean they don’t hurt.”

At a trade show in Manhattan’s Javits Center around 2006, Daniel Rozengurtel spotted Neumann’s head above a swarm of people at the Krawlers booth. Rozengurtel and his wife had started an e-commerce website called Spiffy Baby. It didn’t take long for Neumann to convince the couple, who had recently had a baby, that the kneepad-lined clothes were something they’d need for their child—as would their customers. Within a single conversation, Neumann struck Rozengurtel as amazing. He put in an order.

On a good day, Neumann sold thousands of dollars of baby clothes at a time. He bounced off the walls with energy and ideas, constantly hustling and calling prospective investors and retailers. He struggled to sit still for long periods; he constantly paced around his office as he talked on the phone. He loved the negotiating, the banter, and the sport of it all. He would even haggle with bewildered department store salespeople.

Neumann wasn’t rich yet, but he was having fun and learning the ropes of deal making. And his twenties in New York, in all their kinetic glory, were stable—at least when compared with what came before them.

NEUMANN WAS BORN IN APRIL 1979 IN THE SOUTHERN ISRAELI city of Be’er Sheva’ to a pair of medical students at Ben-Gurion University. He and his sister relocated each time his parents switched hospitals as part of their training. His parents divorced when Adam was seven, and he and Adi went with their mother, Avivit, to the United States, where she secured an oncology fellowship in Indianapolis. Neumann’s childhood, by his own account, was “shitty.” A bright child, he suffered from severe dyslexia, making reading difficult. His mother, who would go on to be one of Israel’s top oncologists, was often exhausted from her work ministering to cancer patients.

After two years in Indianapolis, Neumann and his family returned to Israel, where his father had remained. The siblings lived with Avivit. She lined up a job at a hospital in western Israel, as well as a part-time gig on a kibbutz—one of numerous socialist-inspired communities scattered throughout the country, remnants of a utopian movement started decades earlier. Because of her work as a doctor there, the Neumanns got housing within the kibbutz’s gates.

The kibbutz, Nir Am, had roughly six hundred residents and sat ten miles inland from the Mediterranean Sea, just on the northern edge of the Negev Desert. The ethos of the kibbutz movement was one of sharing and egalitarianism. For decades after its founding in 1943, Nir Am residents supported the kibbutz by picking grapefruits and potatoes in the fields or working in the on-site cutlery factory, a low-tech maker of forks, knives, and spoons. Salaries were equal. Cars were shared—with driving hours controlled by a sign-up sheet. In Nir Am’s brutalist concrete dining hall, families would join together to eat meals of cereal, chicken, or falafel.

Neumann, then eleven, struggled to make friends. The children in Nir Am had grown up in the community and knew one another like siblings. Neumann and his mom and sister, on the other hand, were outsiders: they were simply renting space there. But Neumann eventually endeared himself to the others. He was loud and fun and invited peers over to his room, where he showed off American trinkets, like his Nintendo video-game system. Outside, they’d play basketball, or sometimes with a baseball Neumann brought from America. As years passed, his friends became the center of his community; he slept in the house designated for teenagers, where he had a sizable room of his own.

Neumann’s time in Nir Am coincided with sweeping changes in the kibbutz structure. Throughout Israel, the idealistic dreams of the kibbutz had begun to falter. These communities were designed to be self-sustaining, but decades into their existence they relied heavily on government subsidies. The vision wasn’t working, and as finances deteriorated, Nir Am began to change—to introduce capitalistic reforms to the troubled socialist structures. More residents took jobs outside the kibbutz, while all residents began to pay for meals and air-conditioning; food waste and electricity use plunged. (Later the cafeteria would shut down and be converted into a co-working space.)

Neumann loved the sense of community at Nir Am and the close bonds he made, but the economic egalitarian spirit didn’t rub off on him. He told friends he wanted to leave and make millions of dollars. He would later carp about the inherent unfairness of kibbutz life. Slackers and hard workers received the same pay, he’d say.

IN ISRAEL, MILITARY SERVICE IS COMPULSORY, A RITE OF PASSAGE during which men and women, usually serving in their late teens and early twenties, often forge lifelong friendships and vast peer networks. Neumann, aiming high, scored a spot in the naval academy, an elite placement within the Israel Defense Forces, second in prestige only to fighter pilot training. The position required seven years of service rather than the mandatory three. The navy screened cadets with rigorous tests, seeking candidates who could combine physical agility with problem solving.

Neumann, athletic and sharp, completed the initial training—a stage where attrition is high. Still, his leadership showed itself more on days off, when he would corral friends for windsurfing expeditions on the Sea of Galilee. As he moved into the next phase of his naval training—serving on boats and helping coordinate operations on land—he made it clear to friends that the rigid, rule-bound hierarchy of the military wasn’t for him.

One evening, Neumann and several junior officers attended a party on a rented cruise ship near the naval base. Neumann was supposed to be on his assigned navy ship, watching over it while it was docked for the night, he told others. A missile boat isn’t like a car in a parking lot: one can’t just roll up the windows, lock the door, and leave it alone. Yet, while downing drinks with a fellow cadet on the cruise ship, Neumann boasted about how he’d snuck off to join the party boat, leaving his post unattended.

While his classmates went on to serve as officers for many more years, Neumann would not. Several officers who served with him say he got a medical exemption, claiming an ailment they suspected was exaggerated in order to avoid years of seafaring. Instead, he stayed in the port in Haifa, occasionally teasing his colleagues when they returned from a few days at sea. They weren’t amused.

Rather than serving the full seven years, he ended his service after five—bored and frustrated by military service. By the summer of 2001, he was eager to leave the country. His sister—then a celebrity in Israel—brought him onto a segment on the Guy Pines show, a gossipy talk show that was a hit there. Wearing a white tank top and wraparound sunglasses, Neumann, twenty-two, outlined his own plans while sitting next to his sister. “We’re moving to New York,” he told the interviewer, before gleefully recounting a time he visited Adi on a prior trip to the city and met Matt Damon at a club.

NEW YORK PROVED TO HAVE THE GLITZ NEUMANN IMAGINED—the bars and the clubs and the beautiful people.

But business wasn’t turning out as he’d hoped.

As he tried to get Krawlers going, it became clear that thousands of dollars in sales here and there weren’t going to build the baby clothes empire he’d imagined. While he didn’t have to answer to any boss but himself, building a business was hard. Neumann’s dyslexia weighed him down. Reading was difficult, as was using a computer: he had to ask others to send emails, or he would send typo-ridden messages himself. Finances, meanwhile, were shaky, and the company was subsidized by his sister and others. Red ink was in great supply. In 2006, Neumann wrote to his clothes designer, Ranee Kamens, that the company had lost $45,000 in the past year. Returns piled up, and Krawlers had to give customers credits for the following season—a sign of defective or low-quality products.

“Spring season was not a good season for us,” he wrote.

Kamens, too, was struggling to get paid. She left Krawlers by the fall, but had yet to be paid for her work from the prior spring. She wrote an email requesting that compensation, and Neumann responded that he’d take care of it.

Two weeks later, Kamens sent him another message, noting, “My birthday is the 19th. It would be a great present if we c/d be settled by then.”

She didn’t hear from him.

Neumann realized Krawlers wasn’t headed where he wanted it to go. It was hard to see how he’d be the millionaire he’d boasted he’d become while at Nir Am.

“It’s not going to be a one billion dollar business,” he told Roy Ramon, a good friend he first met in the navy.

He needed a bigger idea.