This sounds a bit similar to - and just as ludicrous as - American taxpayers financially assisting or “bailing out” massive companies which were/are so bad at cash flow management that their runway was/is only 1-3 months, despite hundreds of millions - if not billions - in annual revenue and a varying chunk of that being profit.

>massive companies which were/are so bad at cash flow management that their runway was/is only 1-3 months

Is this considered odd? These are established companies, not startups. They don't need months or years of runway.

>despite hundreds of millions - if not billions - in annual revenue and a varying chunk of that being profit

I'm not sure why millions/billions in revenue is a relevant metric here. If they operate on razor thin margins, they're going down either way.

>They don't need months or years of runway.

Obviously they do if they're demanding bailouts. That's three times in the last 20 years that the federal government has had to bail out "too big to fail" businesses... airlines in 2001, banks/automakers in 2008, and everything in 2020.

Like mbrameld said, the only reason they don't have runway is because the government will bail them out.

If the federal government is actually the implicit insurer of these companies, then the federal government should be collecting premiums.

They just buy politicians, which is cheaper than premiums would be.

That would be corporate taxes, and in fact at least some people are asking if maybe we need to roll back the recent corporate tax cuts.

> They don't need months or years of runway.

Isn't that only because bailouts are available for unforseen hardships that would otherwise require a runway?

MBAs strategically weaken businesses with debt instruments so they aren't "leaving money on the table". We shouldn't be excusing this sort of behavior. Businesses schools need to start teaching their acolytes about planning for a future more than three months away. Everyone wants to look like Apple with a juiced vanity stock price but they won't squirrel away the cash needed to survive a rainy day.

Business schools teach what will be relevant on the job. If large corporate bankruptcies were an issue, MBA programs would teach it.

So ... the business equivalent of "Generals are always fighting the last war"?

Funny how you can also use that exact sentence to say business schools are bad at teaching.

I'm sympathetic to this view. It doesn't seem very efficient to have businesses compete on whether they can predict major disasters. That means some of them will be unprofitable most of the time, and then have a monopoly once their day comes.

OTOH, you also don't want businesses to be/look profitable simply by running on super short runways while high on debt. There are all kinds of non-black-swan things that they need to anticipate riding out if they want to be solid businesses. The culture of running on that model (as the neighboring comments note) needs to die.

A middle ground might be to just require businesses to contribute to a common "rainy day fund" that activates whenever the government has to fight a major disaster, and, as public policy, bans entire businesses.

But then, I don't see a major economic/financial difference between that, and just paying unemployment/bailouts out of general tax revenue. The only difference would be "who bears the burden" -- but it's not much a difference, given that disasters affect the whole economy at once, and most everyone is thus affected.

I'm not advocating a position -- not in this comment, anyway -- just wanted to give an overview of the dynamics.

They absolutely should have runway and understand the risk they are taking when investing in companies with negative margins and hedge their bets early.

If they know the government will bail them out in the end, they can continue to freely burn money at the expense of the Japanese people.

American taxpayers invest their 401k money into american stock market, and they vote with their money for such companies. I'm against bailouts on libertarian principles, but if you're going to do bailouts at all, I don't see any reason why you wouldn't bailout these companies.

(And, every time bailouts are mentioned, I have to notice that it's not free money, it's loans, with interests, and 2008 bailout have actually made money for american taxpayers in the end. May be not as much money as other investments would, but it also had a nice side effect of saving american (and probably world) economy from even worse disaster).

Edit: OK, I was wroung about free money, by bad. But when the 2008 bailour is mentioned, I feel that most people discussing it still think of it as some sort of handout.

That's not exactly true this time. The airlines, for instance, are getting about $35 billion in outright grants, and $15 billion in loans and warrants equal to 10% of the total.

The large part of it is free money, and many major US airlines have been the worst offenders at financial engineering, spending the large part of their free cash flow on stock buybacks, and running the business on razor margins.

The loans are forgiveable if used for salaries and rent and interest on existing debt, as long as you hire back or keep 90% of your staff at 90% of wages.

So any company can say that they used 100% of the money to pay for the approved things for 8 weeks, and that amount of money is forgiven.

Most of the loan is like free money to most companies.

No, the 2008 recession saw Fed Quantitiative easing put in $4.6T in money that was never paid back to outright buy assets off of banks at full value. People only get told about TARP which was a temporary loan, but the vast magnitude of bailout was around the QE buyouts.

Almost half of Americans don't have any retirement savings at all, not to mention 401ks.

This happens all the time all over the World, the more you learn about it the more you lose "faith" in whatever you're doing.

But it's all psychology 101 really, once you are viewed as "too big to fail", everyone contributes to your gigantic scam like a nervous peasant and they'd rather do it forever than take the hit now and let it burn.

I might be missing the nuance here but how is WeWork "too big to fail"?

While many were against the 2008-09 bailouts, you could at least see the logic of why the cost of the wake left behind from a company like General Motors radically reorganizing or dissolving would be worse than the cost of bailing them out.

What happens if WeWork dissolves? Softbank and its investors lose a couple billion. They'll survive. WeWork owns some real estate and would leave behind office space that's already built out for short-term leasing.

They'd be leaving behind something that can be mostly done turn-key by the next owner, hopefully on a smaller scale, with less ambitious growth expectations. They wouldn't be leaving behind an entire supply chain that extends well beyond themselves.

WeWork has more liabilities with its long term leases than the real estate it owns.

Adam set that company up for failure and Son funded that stupid vision. Appropriately it was with the SoftBank Vision Fund.

GP is talking about SoftBank. With that kind of debt it's likely that SoftBank will need to get bailed out by the Japan government, i.e. Japanese tax payers.

That is ssharp’s point. Why do Japanese taxpayers need to bail out a Saudi gambling operation?

Answer is they don’t “need” to.

Bailing out SoftBank is different from bailing out Vision fund, I'm sure Vision fund will burn on its own.

Softbank is the one that is too big to fail, and they are facing a lot more than just writing down wework right now

"While many were against the 2008-09 bailouts, you could at least see the logic of why the cost of the wake left behind from a company like General Motors radically reorganizing or dissolving would be worse than the cost of bailing them out."

It isn't logic grounded in some empirical truth. Bailouts - who gets them, as well as what would happen if not, are so subjective that there's no fair way to even go about it.

What's worse is to perpetuate a culture, model, industry that doesn't deserve to continue to operate. And by deserve, it's not my opinion, rather logic of the market dictating things.

As if that wasn't even, bailouts reward poor business practices - someone please prove otherwise!

Appropriately enough I saw this about RBS today:

https://www.bbc.co.uk/news/uk-scotland-scotland-business-524...

They got £46 billion from the UK government.

Softbank walked away from the planned bailout of Neumann, so that $1Bn golden parachute for Neumann is long gone. Now he has to sue softbank to try and get it back but there's just no way it's ever going to happen.

>>Now he has to sue softbank to try and get it back but there's just no way it's ever going to happen.

You think Softbank will win the lawsuit? Any idea why?

Adam Neumann is delusional and/or a con artist. I don't see him being pitied in court.

In my experience, courts don’t take pity into account anyway, they work using the contracts that exist two parties, subject to the law of the jurisdiction.

However, he is a very good con artist. I could see him getting away with some more swindling at the courts, because really that's a game all about persuasion, not truth.

Matt Levine has wrote at length about this. Neumann does not have a case.

That being said, anything can happen in court.

Thanks for the insight on Matt Levine's work. Here's [0] an article I found that I found pretty compelling, in case others are seeking a starting point.

[0] https://www.bloomberg.com/opinion/articles/2019-10-23/how-do...

Masa has been active on Twitter for the first time in years. Buying masks for public usage in Japan etc.

He's not doing it for altruistic reasons. It's sophisticated rent-seeking via image glossing.

Technically it wouldn't be for Adam Neumann personally. Softbank has pulled back it's tender offer for an additional $3B share re-purchase which would have mostly come from existing shareholders.

https://www.cnbc.com/2020/04/02/softbank-pulls-deal-costing-...

This was the deal that would have been the golden parachute for Adam Neumann as well as providing a sizable return for Benchmark.

This is now going to go to litigation, but highly unlikely that it will close as there were certain conditions to the deal closing which haven't been met.

Wouldn't blame Neumann for this. He certainly made Western media outlets swoon with his haute couture brand of PT Barnum bullshit, but Softbank held the purse strings and knew what the financials looked like.

I wonder what Japanese public opinion is regarding the central bank potentially bailing out a rich megacorp. Are they also resigned to the 'too big to let fail' philosophy that we in the west consider part and parcel of our brand of capitalism?

AFAIK neither Son nor SoftBank are liked much by the Japanese public