1-Sentence-Summary: The Cult of We presents the story of WeWork, a hyped American company that offered office spaces for rent and became the most valuable start-up in the world, only to be exposed later on as a massively overpriced business that was in fact losing a million dollars a day.
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The story of WeWork went a long way in the financial and journalistic world. Adam Neumann was the CEO of the highest valued start-up in the world and a master of hiding a crumbling business under misled valuations. His unsettling thirst for growth and the lack of strategic planning brought a sudden end to his business in 2019.
While WeWork could’ve been a successful organization today, what stopped it was an uncoordinated leadership style combined with a get-rich-quick scheme, backed by nothing much but words. The Cult of We explores the story of WeWork and how its CEO managed to fool world-renowned investors and institutions for over a decade.
Here are the three most important lessons from the book:
- A big dream and a good pitch can take an entrepreneur far in life.
- WeWork became a recipe for failure when it accelerated growth and lost track of its core business.
- When leaders allow their ego and emotions to take over, their business ends in catastrophe.
The fiasco of WeWork serves as a life lesson for all entrepreneurs, but in order to understand the main points of it, we’ll have to take each title one by one. Let’s see!
Lesson 1: Knowing how to sell your dream can open remarkable doors in life
Undoubtedly, Adam Neumann was a great communicator and knew how to sell his pitch. Back in 2006, he met Miguel McKelvey, who later became the co-founder of WeWork. Miguel never wanted to get massively rich. However, Adam was convincing enough to make him say yes to the crazy journey they were about to embark on.
At first, they sold ready-to-go offices for tech companies and freelancers. While profitable, they sold their stake to the landlord shortly. It was time to expand and look for new offices to rent. After pitching their startup to Joel Schreiber by saying it was worth $45 million, the investor bought one-third of the business for $15 million.
Later, they were presenting themselves as a tech startup offering renting services as a means to increase their valuation to venture capitalists. Neumann was comparing the company to a real-life Facebook, and himself as the new Steve Jobs. Everybody was hooked, and so WeWork quickly expanded in Europe and Asia.
Naturally, the two lost the pace of development, so Miguel opted out. But Neumann continued to seek insane growth. So he went to ask for funding from Softbank’s CEO, Masayoshi Son, which he received. In fact, Softbank valued the company at $47 billion, and American capitalists weren’t too far from this valuation figure either.
Lesson 2: Always plan growth strategically and never lose sight of your business’s core values
The problem with WeWork is that Neumann was looking to expand at a pace way beyond his powers. The founders expanded in Europe and Asia. And this was before they fully established the business and had well-set procedures in place. The hype continued to a point that people were investing in this company without taking the time to research it.
In fact, WeWork was looking to create a modern workplace, such as Google’s, where you can benefit from free food (vegan options included), free gym, happy hours, and so on. Naturally, the company wasn’t making any profits and was in fact losing one million dollars per day.
The other problem was the expansion in many markets. Offering so many complimentary services made everyone forget the core business model, which was to offer offices for people to work in. The biggest awe of them all is that both investors and institutions such as American or Asian banks failed to notice the faults in the business, up to a certain point.
Neumann was so brilliant at painting a bright future and coming up with expansion plans, that everyone overlooked the core aspects of WeWork and jumped straight to investing. All these aspects led to a fatal ending for WeWork, which was exposed in 2019 with the company’s valuations dropping billions overnight.
Lesson 3: In business, ration must always dominate against emotions
Adam Neumann was starting to have megalomaniacal ideas regarding WeWork. He sought to diversify the business activities, enter new markets, and offer complementary services. He also wanted 20-to-1 voting power, which was approved.
However, when Softbank cut off the funding, the company had to find a new source of financial aid. So they filed an IPO prospectus. WeWork went public on the 19th of August 2019, and what followed was a disaster. The entire financial world mocked the company, and Neumann stepped down from the board shortly.
Essentially, his ego and desire to expand too fast were the most prominent aspects of his downfall, which is why it’s important to keep your mind clear and always use strategic thinking in business. While work-life balance is important, a good leader treats his company with extreme care and doesn’t just party with every occasion, as Neumann did.
The Cult of We Review
The Cult of We explores the downfall of America’s most valuable and sought-after start-up: WeWork. The overhyped office-space provider advertised itself as a service/tech-like company so as to attract huge investments. But once Neumann received them, it looked like he didn’t know how to use the money wisely. As power and a thirst for rapid expansion and wealth took over him, WeWork started to crumble from within. It then culminated with a total fiasco once the company tried to go public.
Who would I recommend The Cult of We summary to?
The 30-year-old financial journalist who loves a good story that made it to the top news, the 32-year-old start-up founder who is looking to learn from other people’s mistakes in business or the 27-year-old person who likes to be on top of financial news around the world.