WeWork: Or the Making and Breaking of a $47 Billion Unicorn Premieres at SXSW 2021

Reflecting the old chestnut, “truth is stranger than fiction,” the documentary, WeWork: Or The Making and Breaking of a $47 Billion Unicorn illustrates that saying perfectly. Director Jed Rothstein’s doc feature tells of the incredibly swift rise of WeWork co-founder Adam Neumann and his equally fast fall — a tragedy as dramatic as any fictional tale.

The film follows Neumann as he takes what is essentially a real estate rental company and tries to transform into what resembles a tech startup. He is ultimately forced out of the company after a failed IPO and for a while, is isolated in the business world wilderness. Of course, in the end, Neumann comes out ahead, gaining millions from various payoffs.

As for Rothstein, he has 11 productions to his credit as director, including this 2021production with its World Premiere being at SXSW this week. Some of his other films includes in 2020, two episodes of The Innocence Files (a TV Mini-Series documentary) and two episodes of The Witness: The Trials of Franky Carrillo and The Witness: The Murder of Donald Sarpy. As a producer, Rothstein has 16 credits including some for films he directed.

One on one interview with director Jed Rothstein

Q: How did you get interested in this subject matter to begin with?

JR: I’ve always been interested in financial stories. If we can make some of these stories engaging for a general audience, then we can really help us understand how we interact with each other because we all live in a capitalist world. So our interactions occur through the conduct of business. This was a great story, it had a very charismatic leader at the center of it.

Adam [Neumann] had a very dramatic rise and a very rapid fall, and those are strong elements for a compelling narrative. Unpacking what happened inside of those things can really help us. Looking at the different characters who rode up with him and suffered the downfall, can help us learn a lot about this era that just ended.

Q: Adam Neumann started out in the baby merchandising business called Krawlers. He doesn’t come from a rich family or anything like that. So how did he develop Greendesk, which was basically a predecessor of WeWork… How did he get all that money to rent out the building in Manhattan?

JR: What happened, if I recall — and this isn’t in the film so I’m not a hundred percent certain — Adam and Miguel started Greendesk as partners with the owner of the building in which they had  their first Greendesk in Brooklyn. They rented everything out very quickly and was very successful, and they wanted to expand, but the owner of that building didn’t really want to expand to Manhattan, he just wanted to keep his business. So he bought them out of Greendesk and they used the money they got from that.

Q: Do you think a lot of young workers were an easy target for buying into the spiritual aspect of Adam’s vision?

JR: I think young people want to to be a part of something with meaning. when we’re young, all of us want to try out new and different things, and I think Adam presented a very compelling vision. You could look at it and say that they were easy targets, but you could also say that he offered a compelling journey to them and a lot of them wanted to take it. With a lot of these startup jobs, yes, worked people like crazy, worked them to the bone, and Adam convinced them to work harder and harder and harder. And that was crazy, but you could say that about many startups in the U.S.

Granted some of these guys in banking and law make more money to start, but they work insane hours, they work inhumane hours. In that context, it‘s not that crazy that someone running a business, where’s he like, “work harder, work harder — and also, by the way, here’s free beer, we’re making the world a  better place.” With all that mixed together, it’s not hard to see why that’s attractive to people starting off their careers.

Q: Obviously, WeWork came in at the right time after the financial crisis in 2008 because it was the solution for a lot of empty buildings in Manhattan. And that came at the right time. Obviously Regus and other companies offered the same concept, the idea of serviced office space, and could grow as well.

JR:  I think there was certainly [amount of] office space available. Because of the financial crisis there were a lot of people who were out of work who might have decided to try to start their own companies, so there were young entrepreneurs who needed space to work. Adam and Miguel did a good job in re-envisioning what shared office space could look like, making it easier, opening up the walls. I’m a New Yorker and I’ve been an independent filmmaker for a long time, and I’ve had to get my own offices and work in different offices. I’m lucky to have a decent one now.

For years, you’d go into these places, they’re dark, crummy and nothing works right. You’d have to sign a long lease as a young businessperson. That’s a drag because you don’t even know if your business is going to be around. So Adam and Miguel did foresee a lot of these issues and created a business solution to them. Others did too. There are other co-working places, but they did it well and grew it, and attracted other backers to grow obviously very fast — too fast in the end — but certainly, at the beginning, they were growing.

Q: SoftBank decided to invest in venture companies specializing in AI called the “Vision Fund”— many venture companies invest in future technology — but WeWork is a company specializing in shared offices,   renting space basically. There’s a vulnerable part to that, because easy to duplicate.

JR: They didn’t have a moat, right? That’s what we would say in business parlance: “what’s your moat?”

Q: What do you mean by “moat”?

JR: Well, a castle has like a river around it, a moat. That’s what prevents somebody else from doing what you do. What would prevent other companies from just renting space and renting desks? Why are you special? Why should I invest in your business? They would say, “Well, we don’t just rent desks. we have all these other ideas… Certainly they convinced Masayoshi-san that they had a very advanced set of technological systems in place and they were going to dominate the market at scale, and they were going to have this portfolio of companies that he had that were within the vision fund and were going to dominate the global economy.

I think overestimated the extent to which technology was going to be at the core of their business, and clearly the major economic function of high-growth tech companies is that they have very low production costs for each additional unit. If you’re making software, once you get it to scale, you can sell it to 10 billion people, it doesn’t really cost you very much to make each additional copy — you just make more copies of the software. But renting desks, you have this fixed [set of] costs — you have to rent the space, you have to staff it, so it gets very hard to grow in quite the same exponential way and be valued as a tech company.

Q: It is also easy to replicate that, so that is the vulnerable side to this.

JR: There’s dozens of other co-working companies.

I know they would say, we do it at scale, we have economies of scale. We have this special community; you can go and work anywhere in  the world, and to an extent that’s true, but clearly other companies have replicated it and are competing with them. If you have me bet right now, [I’d place] an even bet on whether or not they’re going to be a successful company or not, I would probably bet they probably would be. I’m not saying that as an investment advisor, I don’t have any inside information on it at all — but they’ll probably do well when we come out of COVID, when everybody comes out of COVID.

Q: So that’s why Masayoshi-san was providing financial relief after knowing that WeWork had these deteriorating business conditions. In 2019, it was an unlisted company and was about to get into NASDAQ, but obviously that didn’t work out. They were in a predicament but at the time Masayoshi-san provided financial relief, so I wonder, why was Masayoshi-san still investing money in a company that had really crumble?

JR: It’s a good question. I would love to ask Masayoshi-san who is a fascinating and important figure in the business world.

Q: He probably looked at it from a Vision Fund perspective, not just this one company, so in order to move forward they had to organize the system in a way to work as [part of] a vision plan. I can see his perspective and obviously that’s a smart idea, but to hold on to this company, it has a bad reputation at the same time, so to me, it’s difficult to manage all those things.

JR: I agree that it does seem difficult. Obviously, I can’t know what his logic was, but you’re right, he has bigger concerns than just WeWorks, he has the whole Fund, he has investors who are very, very big players in Sovereign Wealth Fund. And the thing that’s interesting about Masayoshi-san and what makes his story so interesting — even though it’s beyond the scope of this film — is that he’s a real visionary who bets big and  sometimes makes enormously good bets, maybe the best investments of all time like Alibaba…  But he also made terrible investments and lost a lot of money. I think that’s a very interesting and bold mindset; I feel interested to talk to him about why he stuck with WeWork, and what he’s expecting would happen with it now, because he basically owns it  outright.

Q: Yeah, 80 or 90%. What do you think about Adam’s wife, Rebekah Neumann, who was originally an actress and a cousin of Gwyneth Paltrow. She founded WeGrow, which is actually a private school. How is it different from a regular school? What is her vision, what is she set out to do?

JR: Good question. Stop me if I’m telling you something you already know, but in the US, most places have public schools which are free, and cost nothing for your children to go to. Then there are private schools, which in a big city like New York, Los Angeles, San Francisco, and Boston can be very, very expensive, costing thousands of dollars a year.

Q: Yeah, that’s right, compared to Japan.

JR: WeGrow is one of these expensive private schools and that’s what she started, hoping to change education, hopefully, to reimagine education.

Q: What do you think is the future of WeWork at this point? They still get support from SoftBank but I was curious about the vision for WeWork in the future.

JR: I would anticipate that if they have enough support from SoftBank, which it seems like they do, and if they can ride out these next few months — which could be difficult for everybody because we’re still dealing with COVID — they will be in a position to do well. That’s my guess.

Q: With the conditions that we are in,  and still wearing the masks, do you think it will easily go away?

JR: The reopening of Texas and everything?

Q: I’m talking about New York. COVID will be around until next year even though we’re all watching.

JR: That’s another question, certainly. I’m not enough up on what’s happening in Texas to know what they should or shouldn’t be doing. I can say here in New York they’re slowly reopening things. We’re spreading the vaccine. One way or another, I think that by the end of summer, things will increasingly become, or go back to [what they once were]… I hope, we all hope… Who knows what could happen?

I hope things go back to normal.

I hope people go back into offices, and when that happens a place like WeWork would be very well-positioned, because the offices are pretty nice, in good locations and a lot of these big companies will be happy to downsize their permanent long-term lease footprint and take up more flexible options with places like WeWork. I would guess that they’ll do well. That is my hunch. I don’t have that much inside information. I don’t know what their plans are, but my guess is that they would have a pretty good shot at being well-positioned to take advantage of that.