To be fair, you can actually give money to WeWork and get some office space. They seem massively over-valued, and investors seem weirdly OK with Neumanns using self-dealing to feather his own nest, but its, like a real company with an actual business model, and so far as I can tell, they aren't really making objective lies to investors to get them to hand over crazy amounts of cash.

On the other hand, no could ever actually buy an "Edison" blood test machine from Theranos. They were purely a fraud.

I guess its sort of an interesting question about wheter it looks worse to lose money investing in a billion dollar product that would legitimately be worth billions but doesn't exist, or one that does exist but isn't worth billions.

> and investors seem weirdly OK with Neumanns using self-dealing to feather his own nest

Well, sort of. The fact that this IPO has apparently attracted so little interest that it's getting pushed back or canned entirely tells me investors aren't OK with it. It's more like "SoftBank seems weirdly OK with it", and this fiasco is going to cost them so much money that I have a feeling they won't be so lenient with the next set of founders.

The poster above is talking about the people who had invested in the company so far:

The We Company has raised a total of $12.8B in funding over 14 rounds. Their latest funding was raised on Jan 9, 2019 from a Secondary Market round.

https://www.crunchbase.com/organization/wework

Even Softbank wasn't okay, they did one round, but they then reduced their most recent round from 14b to 2b

source: https://techcrunch.com/2019/01/07/for-softbank-no-majority-s...

I know the Vision Fund is massive but the fact that SoftBank was even considering having one fund make a $16 billion investment in one company is insanity to me.

SoftBank does not seem so smart to me, I just think between the two Vision funds - 200B, they have so much money to play with, they don't seem to give a shit. And Masayoshi Son, can just go back to the Saudis and get more money if he needs to.

Am not talking about the service that "WeWork" provides, unquestionably there is a market need for it and the success of the model shows. But all the red flags - with the self-serving CEO, I don't give a shit about his immaturity either, you have the money you can screw around plenty.

When you read the book about Theranos it’s mind boggling how unwilling these bigshot investors and board members are to question their own decisions even while seeing very clear warning signals. Instead they shoot the messenger. I remember similar stuff happening during Enron or the housing bubble in 2008. There were plenty of people with real concerns backed up by concrete data but they just got ignored and ridiculed. And then later “no one saw it coming”.

Anybody counting on investors or startup boards to exercise proper oversight of management is dreaming.

Short of the CEO being accused of sexual harassment or assault by an employee or being caught red-handed stealing from the company, they will keep the job -- especially if the company is growing revenue and continuing to raise money at ever high valuations that VCs/board members can use to mark-up their stock, take back to LPs and raise new funds to grow their assets under management that they can collect 2-3% on every year.

> Short of the CEO being accused of sexual harassment or assault by an employee or being caught red-handed stealing from the company

I would hope being merely accused of sexual harassment would have zero impact until it can be proved.

In fairness, there's a difference between fraud and investors just not doing due diligence and being swept off their feet by a charismatic and manic hard-partying founder. Investors do need to be responsible for their choices. My understanding (based on the HBO documentary) is that Theranos went so far as to present fake test results to investors.

The investors are not stupid. (Except SoftBank maybe.) Most of them will make money once they figure out how to pay Goldman enough to dump this trash into America’s 401ks.

> Are investors so stupid?

Yes.

> Are they so detached from reality?

Yes.

> Whatever happened to due financial diligence?

Too much excess and concentrated capital.

and FOMO of "The Next Big Thing"

What happens when your hiring policy favors folks with little to no practical life experience?

A maniac surrounded by yes-men can be a terrifying thing. As leader of We Work he can only get up to so much mischief. Definitely wouldn't want him as 'President of the World'.

All tech startup CEOs require some element of snake oil salesmanship. You are selling something to investors that doesn't exist yet.

Plus even when it does exist, it's mostly BS nobody really needs if not actually detrimental to the world, like Twitter...

The snake oil is only necessary for companies who want to sell a vision of something that absolutely exists (co-working), but lacks the profitability threshold that investors would get excited about. So they have to turn this into a "it's Co-working...reimagined!" BS.

It sounds like another Facebook to me, where the business model does make sense but it’s just based on a big secret of selling user data. Here the users are startups, and small companies. It’s no accident that you have to use WeWork’s internet access, you cannot get your own internet unlike with a normal office rental company. It’s also no accident that every visitor needs to sign in to declare whom they are visiting, otherwise you can’t get through the barrier. We don’t have total transparency on who the bond holders are, but just like with Facebook’s early investors, I bet the money comes from people who want the data for themselves.

Imagine how much more valuable it is to see which startups are starting to gain traction. Deep pocketed competitors can swoop in and compete with their business at a vulnerable time. Or VC’s who are wooing a company can see if they are the only bidders or if other funds are emailing them (they probably only see metadata of internet traffic but still valuable). Or recruitment consultants can pay to see who is hiring using general visitor reports Etc.

I think the outrageous shenanigans of the CEO are essential deflections that make the magic show work.

Rich people have too much money and not enough places to put it.

Not stupid, greedy AF

One story probably sums the total of my knowledge on this: when John Templeton was in his 80s, a billionaire, had been crushing it for five decades, he was researching the effect of planetary cycles and horoscopes on the market.

I know a few people who managed money with him in Nassau at this time. He wasn't senile. So what was he doing? He was willing to test his beliefs...about everything. He could put aside everything he thought he knew even after five decades of success and ask one simple question: what works?

Now ask the 30-year old BSD "crushing it bro" dude with the CFA and name brand fund manager on his CV about horoscopes. He will tell you it doesn't work but he won't be able to tell you how he know this (in most cases, he won't even understand the distinction between his thoughts and reality).

Most people in the industry know all the facts. They act very professionally at all times when talking seriously with the peers about their many opinions (none of them tested). They don't look at history, they don't look at what works, they don't look at their own decisions (usually, some good funds impose this on managers), they can't think creatively about risk, and they don't know the one or two facts that are important in a big woodpile of information.

One answer that history suggests, in addition to the above, is that this always occurs. This has been happening for hundreds of years. But no-one cares. This time it is different, I am special, I am unique, I have been chosen, etc. (if anything, changes in attitudes have made this thinking even more pervasive...young people are even more individualistic and education institutions generally encourage an indulgent self-image).

Btw: I have (unfortunately) read most books about investment. I am aware of only one book aimed at investors that actually looks at this effect at large (i.e. what is the relationship between technology and markets? why actually works? what has happened in these situations before? etc.): Engines that Move Markets. One book. A million books about speculation and bubbles...but how many books about actual markets, actual technology, and actual investment...one.

The closest is possibly Capital Returns and Capital Account from Marathon...but this is really just a narrative account of two decades. In terms of a "big theory" historical view, there is only one book. That fact alone should demonstrate how utterly disinterested the industry is in anything approaching knowledge (so none of the questions that you pose really matter...no-one cares).