WeWork promised a higher consciousness and signed fifteen-year leases

WeWork was founded in New York in 2010 by Adam Neumann and Miguel McKelvey. It leased office floors, fitted them with glass walls, good coffee and shared kitchens, and rented desks and private offices to freelancers, start-ups and, increasingly, large companies. It grew fast with money from SoftBank, and in January 2019 a new SoftBank investment valued it at 47 billion dollars.

In August 2019 its parent, then called The We Company, filed to go public. The prospectus opened by describing a “community company committed to maximum global impact” whose mission was “to elevate the world’s consciousness”. The financial pages told a plainer story: revenue of about 1.8 billion dollars in 2018, a net loss of well over 1.6 billion, and lease obligations of about 47 billion dollars, mostly on terms around fifteen years, against members who could leave on much shorter notice. Investors balked. Neumann stepped down as chief executive in September, and on 30 September 2019 the company withdrew its filing. WeWork reached the stock market in October 2021 through a merger with a special purpose acquisition company, filed for Chapter 11 on 6 November 2023, and came out of bankruptcy in mid-2024 as a much smaller business controlled by an affiliate of Yardi Systems.

Three descriptions of one company

We read any business through three planes that should describe the same thing: the business model (how money is made), the offer (what the customer actually buys) and the value proposition (what the customer is promised). Lined up, they work as a lie detector, in the sense that any gap between them will eventually show.

At WeWork the three planes described three different companies. The valuation treated it as a technology platform, with the growth multiples that implies. The offer was flexible office space: a landlord’s long-term obligations sold on to tenants in short-term pieces, a model with real merits and a well-known weakness when demand falls. And the value proposition spoke of community and changing the world. Each plane was defensible on its own. Their distance from one another was the risk.

A promise with nothing under it

The Promise Ladder has five rungs, from the empty slogan to the higher call that turns buying into participation. Each rung rests on the ones below and needs its own proofs. A desk with good coffee, a reception and a flexible contract is a solid solution promise, the second rung, and WeWork delivered it well in many cities. Community, the fourth rung, was partly real: members did meet, events did happen. The mission “to elevate the world’s consciousness” sat on the fifth rung with nothing in the offer to prove it.

Our books call this an air-inflated promise: a declaration of the top rung without the rungs underneath. It can work for a while, because a high promise attracts talent, members and investors. It becomes dangerous when it starts to set the price, because then the gap between promise and proof turns into a gap between valuation and cash flow.

The audit always arrives

Private funding rounds let a company tell its story to a small group of investors who have chosen to believe it. A prospectus is the moment when the story and the accounts are printed in the same document, and readers compare them. In WeWork’s case the comparison took a few weeks. Alongside concerns about governance, many of the questions investors and the press raised in August and September 2019 were questions about the planes: is this a technology company, how do fifteen-year leases survive a downturn, what does the mission have to do with the desks.

The bankruptcy four years later, after a pandemic that emptied offices, tested the real-estate plane on its own terms, and it failed that test too. The business that came out in 2024 is a flexible-office operator, which is what the offer had been all along.

Before your story reaches investors or customers, check that the business model, the offer and the promise describe the same company, and that every rung you claim has a proof under it. If you want that check done before someone else runs it, see what we do.