My Take on this Conman's Return to the Business World

WeWork, once one of the hottest startups in the world with a peak valuation of 47 billion USD, is now filing for bankruptcy. And its controversial founder, Adam Neumann, is vying to buy it back.

When a company loses that much in valuation, something has to go seriously wrong. Adam Neumann, a tall and charismatic figure, founded the business after his first venture, a clothing line for babies, failed.

To save cash on his first venture, he sublet his office and came across the idea to make renting office space easier and more communal. Having grown up in an Israeli Kibbutz, a community of farmers with the purpose of sharing resources efficiently, his dream was to create a space where entrepreneurs could come together in hip, modern locations and work together.

The concept took off. Co-working was invented, and quickly Adam Neumann, who proved to have an extraordinary talent for attracting investor money, raised his first check of 15 million USD from real estate mogul Daniel Loeb without even opening shop. Location after location opened, and soon enough the company was valued at a billion dollars.

Here's where Adam Neumann realized the appeal of pitching his company as not just a real estate business but a technology company. Why? Tech. companies have better margins and scalability than traditional real estate businesses. Investors loved it. He got money from banks, prominent venture capital firms, including a 16 Billion USD (!!!) check from Masayoshi Son's SoftBank, which is to date the worst venture capital investment ever.

But, here was something alluring about the boldness of Neumann's vision, as delusional as it was. It didn't matter that WeWork itself was losing money or that it wasn't an actual Tech company. The way in which Neumann sold his vision was delusional, but backed by such conviction and boldness that investors felt they were missing out on a big opportunity if they didn't give him money.

The irony: WeWork's app barely worked, and there was nothing indicating it could turn into one of those trillion-dollar tech giants. In fact, the money was losing money at an alarming rate. Neumann threw lavish parties, bought a private jet and made nonsensical aquisitions of other cash-losing businesses.

Eventually, the early investors wanted to cash out on their investment and pushed for an IPO. Taking your company public means disclosing your company's financials to the public. And, while on the exterior everything seemed to be going well, the truth was that Adam Neumann’s company was burning cash at an unsustainable rate.

The markets battered the stock, and in no time, the company went from a 47 billion USD valuation to a market cap of 7 billion dollars. The con had no way of continuing, and Adam Neumann was kicked out by the advisory board, profiting a payout of more than 1.7 billion dollars himself.

The amazing part of the story is that Adam Neumann is back in business. Recently, he managed to raise funds, this time from another prominent investor, Andreessen Horrowitz, and for his new venture, "Flow." And, on top of that, he wants to buy back his old baby WeWork with the help of the hedge fund investment firm, Third Point.

How can a man so proficient in deceit and so bad at running a profitable business still gain the trust of some of the best financiers in the world?

It's a case study for how far a mixture of self-belief and charm can get you in life — especially when it is exercised in front of people with deep pockets. But, there's something deeply troubling about this story. A few bad actors in a large space can discredit entire industries. A prime example is WireCard, tainting the reputation for future German tech companies.

The allure of quick success and high valuations can often overshadow the foundational principles of business integrity and sustainable growth. Neumann's ability to raise vast amounts of capital underscores the importance of storytelling and charisma in entrepreneurship. But, in the hands of the wrong founder, storytelling and charisma can be fatal for entire industries.

When even the sharpest minds are enthralled by one bad actor, overriding practical considerations, it's a bad sign. And it's happened time and time again. In the most extreme cases – Bernie Madoff – at the cost of tens of thousands households.

In a free market, the rise of bad actors is inevitable, and observing them closely can help you understand where an industry is headed — if a space fills up with too many grifters, it is an indication of a bubble that is bound to bust.

What do you think of Adam Neumann's return?

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