* was inspired by

* generations of prior businesspeople doing

Let's not forget that Enron, Theranos and WeWork propagated a form of corporate fraud that is not foreign to the modern corporate investment system. There are always opportunities to bolt on corporate structures that juice the plausible metrics and existence of an "investable" moat, but at least in more public markets oriented world of yesteryear, SEC regulations could be put in place to plausibly protect main street investors. In the current engorged state of private capital, many private investors will have to learn due diligence the hard way, or they will lose their shirts to exceedingly savvy hucksters and grifters masquerading as trailblazing mavericks.

> Let's not forget that Enron, Theranos and WeWork propagated a form of corporate fraud

What aspect of WeWork was/is fraudulent?

Let's start with Community-adjusted EBITDA as far as the more egregious ones go. That was the alarm bell for me.

I think as they dig in to the numbers more there maybe some fraud or very shady accounting that starts to pop up.

That might happen, sure, but the point was rather that you just need to look like you're gonna be something to get paid. This will make everyone who wants to start a business at least tempted to spend more time building a facade than an actual business.

Let's hope WeWork is enough of a cautionary tail for investors that they're much more on guard against this sort of thing.

I don't think being "tech" is the primary thing that's been exploited here. This is an example of "any indicator or metric will be gamed, no exceptions."

For quite some time the standard thesis of VCs has been to "invest in the founder" before other concerns. Look for a dynamic, resourceful, magnetic, go-getter founder and invest in them and the business is secondary. All VCs don't follow this thesis but it's been very popular among less technical VCs probably because less technical VCs are less competent to evaluate aspects of the business other than the founder's personality.

This heuristic is going to give you two sets of people: highly motivated and resourceful visionaries, and sociopathic con artists. The latter far outnumber the former, and without looking at anything but the founder it's hard to tell the difference. In my experience sociopathic hustler types are probably going to look better according to this heuristic since they are generally better at manipulating people and projecting a superficial aura of power and competence. Even the most dynamic looking visionaries are generally spending more of their time being creators and organizers than perfecting their ability to fake being creators and organizers.

This investment thesis gave us Theranos and WeWork among others.

Repeat after me: any indicator or metric will be gamed, no exceptions. If any investment thesis becomes popular it will be exploited by con artists who will learn to fake whatever indicators are being sought. No exceptions. If "invest in introverted nerds with cool tech" became the popular thesis, that too would be gamed. You'd see a lot of sociopaths pretending to be introverted nerds with whiz-bang sounding snake oil "tech." (This has in fact happened in other areas... look into free energy and medical quackery for examples.)

The even more general principle here is that there is no formula that can act as a substitute for constantly engaged and applied intelligence. I think this is a broad principle. If such formulas existed in any domain then the human brain with its high metabolic cost would never have evolved.

If I were a VC my investment thesis would be "each potential investment is entirely unique and must be evaluated by reasoning from first principles." There are patterns of course, but any pattern that's existed long enough to be recognized as such is already "priced in" and is also probably in the process of being exploited. If you see the pattern you are probably too late to profit from it.

Usually these tricks only work once, or for one generation.