The WeWork saga may have been the high point of the "blitzscale" era.
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Good morning.
If you missed it, the Wall Street Journal had a grand weekend take-out on the WeWork debacle. This story has the earmarks of a year-end effort to shore up a journalism awards entry. But that’s okay; it also has a lot of great detail. And the WeWork saga will likely be the high water mark of the “blitzscale” era—an era when companies could raise untold amounts of cash to pursue growth at the expense of pretty much anything else, including profits, sound governance, and just plain common sense.
You can read the full story here. But to save you time, here are ten choice excerpts.
—Investors poured capital into Mr. Neumann’s business bonfire and ceded control, rarely pushing back with any force despite mounting problems and year after year of missed projections.
—Masayoshi Son, the CEO of SoftBank Group Corp., who helped inflate WeWork’s valuation to $47 billion, pushed an already wild-spending Mr. Neumann to act bigger and crazier.
—JPMorgan Chase & Co. CEO James Dimon and other bankers, instead of injecting a dose of reality, spent years championing Mr. Neumann and the company as they battled for the coveted IPO assignment.
—The outside board directors, all of whom had decades of experience in business and finance, voted for years to approve decisions by Mr. Neumann that paved the way for WeWork’s near collapse. Some of them had potential conflicts of interests themselves.
—Mr. Neumann repeatedly skipped board meetings, including as the company was planning the IPO.
—In late 2015, WeWork was completing an investment round led by Beijing based Hony Capital Ltd. that pushed its valuation to $16 billion…Mr. Neumann invited its CEO, John Zhao, to a party at 110 Wall Street… There, guests passed around tequila shots. Mr. Neumann picked up a fire extinguisher and set it off, spraying Mr. Zhao and others with white foam.
—To maintain control…Mr. Neumann restructured WeWork’s stock so that each of his shares had 10 times the vote of a normal one… Bruce Dunlevie, Benchmark’s representative on the board, resisted the voting control change, telling Mr. Neumann and other members of the board that absolute power corrupts absolutely. Mr. Neumann prevailed.
—He had always been open about hiring friends and family… At an executive retreat in Montauk on Long Island, Mr. Neumann once raised a glass in a toast “to nepotism,” attendees said.
—At one meeting Mr. Son told Mr. Neumann he shouldn’t be proud of WeWork’s lean sales staff, and that it should aim to have 10,000 salespeople, a giant number for a company that had fewer than 10,000 total employees at the time.
—Mr. Neumann made surf trips to the Dominican Republic and the Maldives. During a week in early June, WeWork’s company plane made two trips between Costa Rica and New York. Meanwhile, Mr. Neumann kept up surfing from the Hamptons and Montauk over the summer. Executives from WeWork and bankers and advisers…worked with Mr. Neumann and his wife on IPO-related documents and presentations at their homes there.
Let’s hope the era is over. More news below.
Alan Murray
@alansmurray
alan.murray@fortune.com
