October 26, 2019 BY WorkSocial Press and Editorial
What do you do if you are a Japanese conglomerate whose investment fund entrusted billions of dollars to a grandiose-bordering-on-shady entrepreneur, only to watch said entrepreneur:
D. Selling or borrowing against his own shares in the company to buy five mansions and a private jet?
If you’re SoftBank, you throw billions more at WeWork, presumably hoping that a sudden torrent of cash will extinguish this monetary bonfire. Also, you pay the entrepreneur, Adam Neumann, more than $1 billion to stop tossing matches at your money and go away.
In the end, SoftBank reportedly will have invested $18.5 billion in this disaster, more than the gross domestic product of Jamaica. Think about that: Instead of buying a co-working company with an astronomical burn rate, Masayoshi Son, the chief executive of SoftBank, and the sovereign wealth funds that invested with him could have had all the stuff produced in Jamaica for an entire year — aluminum ore, coffee, rum. They could have rented out every hotel room, restaurant and movie theater on the island just for themselves and their friends, and they could have frolicked up and down Dunn’s River Falls like Tom Cruise and Elisabeth Shue in “Cocktail.”
Instead, Son gave that money to Neumann to rent empty offices, buy a lot of plate glass and create what a WeWork tenant of my acquaintance called “a high-tech prison” with “concentric rectangles of fully transparent cells.”
The WeWork story is so utterly bizarre that people can’t even get properly outraged about it. I mean, they’re trying — Sen. Tom Cotton (R-Ark.) tweeted Wednesday night that “Neumann is a fraud & a good example of why some people support a socialist like @BernieSanders. He ought to be sued & investigated.”
And sure, you’d think there must be an indictment in the offing somewhere. Neumann’s self-dealing was so egregious that kleptocrats around the world are enviously scribbling notes.
It does seem outrageous that Neumann got so much while WeWork’s employees will get to keep their jobs only if they’re lucky. But it’s not like Neumann took that more than $1 billion payout from them. SoftBank gave him voting control over the company, which allowed him to essentially take WeWork hostage and demand a ransom. With a saner governance structure, Neumann couldn’t have done this, and SoftBank could have kept the $1 billion; either way, no court was going to make them gift it to the suffering staff.
So maybe the indictment needed here should be aimed at capitalism, which enabled such an absurd and outrageous outcome. But the premise of capitalism was never that individual capitalists always make wise choices, only that when those capitalists do something egregiously stupid, markets will eventually make them stop. That’s exactly what happened as soon as WeWork filed for an IPO.
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