Today I wrote about WeWork and what I call Counterfeit Capitalism. There are important lessons in CEO Adam Neumann's rise and fall. mattstoller.substack.com/p/wework-and-c…
1. Counterfeit capitalism is running companies not to make money but to lose money. Financiers allow this for two reasons. One, they hope long-term losses turn into market power, aka Amazon. Two, they hope a bigger fool buys at a higher valuation, aka WeWork.
2. WeWork's business model had been to make stupid graphics to show investors in hopes that they give ex-CEO Adam Neumann more money. mattstoller.substack.com/welcome 
3. WeWork's CEO, Adam Neumann, was framed in investor docs as key. "Our future success depends in large part on the continued service of Adam Neumann, our Co-Founder and Chief Executive Officer, which cannot be ensured or guaranteed." And this was true!
4. Reporters danced around Neumann's personality. They called him quirky, charismatic, unorthodox. He was none of that. He was an abusive monster given unlimited credit by financiers from which he could legally steal. mattstoller.substack.com/p/wework-and-c…
5. His wife fired people because she 'didn't like their energy.' He laid out 7% of the company and then immediately had a company celebration hosted by Darryl McDaniels of hip-hop group Run-DMC.
6. The Neumann's took $700 million from the corporation in self-dealing. Then they put a provision for special voting shares conditioned on whether they gave away $1 billion in charity. WeWork is a fantasyland for grifter men with too much capital.
7. Charlatans like Adam Neumann are easy to find. So why did he become so powerful? Simple. Concentrated finance. The two key financiers behind WeWork and Neumann were JP Morgan's Jamie Dimon and Softbank's Masayoshi Son. mattstoller.substack.com/welcome
8. Jamie Dimon of JP Morgan served as Neuman's banker, WeWork's investment banker, and his commercial lender. If Glass-Steagall had been in place, this wouldn't have been possible.
9. Masayoshi Son is a powerful venture capitalist who poured money into WeWork in hopes it could underprice competitors and establish market power in the commercial real estate market. He manipulated private valuations to mark up his portfolio.
10. Amazon, Uber, Lyft, Bird, Netflix are all corporations who underprice to gain market power. It's a dangerous model, and it should be illegal (and is, if the gov't enforced predatory pricing laws). This counterfeit capitalism violates a key tenet of capitalism.
11. Capitalism only works if a corporation thrives by making a collection of inputs into an output that is more valuable than the sum of its parts. Otherwise corporations are destroying value, doing Soviet-style white elephants. mattstoller.substack.com/p/wework-and-c…
12. WeWork was competing not over producing a better products, but over access to capital. There is a swath of the economy doing that now. Endless money-losing is a variant of counterfeiting, and counterfeiting has dangerous economic consequences. mattstoller.substack.com/welcome
13. At first, predatory pricing seems smart. Walmart/Amazon both are cash flow positive, and two day shipping seems like an innovation. As euphoria in capital markets takes hold, predatory pricing scheme come to waste capital on money losing enterprises. mattstoller.substack.com/p/wework-and-c…
14. And soon, powerful men like Dimon are sucked in, consultants start explaining to old-line economy companies how they too can become like WeWork, and eventually more and more of the economy just adopts counterfeit capitalism. mattstoller.substack.com/p/wework-and-c…
15. Who stopped Dimon, Son, and Neumann's fraud? As it turns out, it was Ferdinand Pecora and Franklin Delano Roosevelt. WeWork had to reveal its financial details when going public because of the SEC, established in 1934. Then the private valuation games stopped. Boom. Over.
16. Across the West, the basic problem of a corrupted productive process is a quiet crisis. The reason is simple. The people that do the work in organizations are increasingly excluded from the decision-making about the work. WeWork is a good example. mattstoller.substack.com/welcome
17. If we restore laws against predatory pricing and concentrated finance, counterfeit capitalism goes away. We can then get back to the business of making and selling things to each other without engaging in celebrated cases of fraud and abuse under the guise of ‘quirkiness.’
18. If you want to know more, subscribe to my newsletter, BIG, in which I cover the politics of monopoly and financialization. mattstoller.substack.com/welcome
19. Or order my upcoming book with Simon and Schuster, Goliath: The Hundred Year War Between Monopoly Power and Democracy. The story of battles over corporate power in America in the 20th century is amazing, relevant, and weirdly hidden. simonandschuster.com/books/Goliath/…
20. And this thread wouldn't be complete without a shout-out to @AnandWrites, who has nailed the philanthropy as moral cleanser problem. And @profgalloway and @karaswisher who have been all over the WeWork scam. mattstoller.substack.com/p/wework-and-c…
