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WeWork Isn’t a Tech Company

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Re: WeWork Isn’t a Tech Company

#51

Post by cushychicken »

mrtksn wrote: post #32

I really don't understand the negativity on HN towards WeWork. In principle, how it is different than AirBnB or Uber in regard of being a tech company? It's not like Uber or AirBnB's core compentancies are tech, I'm sure WeWork can also build a dev team making frameworks and research that some day might be used in their core business. The article argues that the difference is that Uber, AirBnB, Yelp, Twitter is a tec…

Two reasons:

1) They've accrued a lot of large financial obligations in their quest to secure office space. There's a lot of concern that these obligations will only grow worse due to the terms of the contracts, or an economic downturn.

2) Their relationship with their CEO seems to have veered more in favor of his personal benefit than sound corporate governance.

Re: WeWork Isn’t a Tech Company

#52

Post by CPLX »

nostromo wrote: post #24
rlucas wrote: post #20

It's a 1920s (pre-FDIC) bank, or a 2008-style risky financial instrument, like an Auction-Rate Preferred. WeWork's business model is "borrow short, lend long." That is, they accept very short term promises to pay (month to month leases from customers), and aggregate them to make very long term promises to pay (mutli year leases from suppliers). Keep the spread. This works as long as there are lots of customers who wi…

This isn't that dissimilar from lots of industries. Every airline that takes a loan to buy a plane is banking on future demand for air travel, for example. Or take Amazon Web Services, which is building data centers to lease out on a short term basis. Yes, there are tremendous risks involved, depending on the lease terms. But it's not at all unusual.

Investing in airlines is the worst idea in history, so perhaps that analogy is sound.

The Amazon example is less relevant on that specific point as AWS owns and operates its own equipment.

Re: WeWork Isn’t a Tech Company

#53

Post by lilbobbytables »

mrtksn wrote: post #32

I really don't understand the negativity on HN towards WeWork. In principle, how it is different than AirBnB or Uber in regard of being a tech company? It's not like Uber or AirBnB's core compentancies are tech, I'm sure WeWork can also build a dev team making frameworks and research that some day might be used in their core business. The article argues that the difference is that Uber, AirBnB, Yelp, Twitter is a tec…

AirBnb and friends could not exist without the basic tech. they're tech doesn't need to be groundbreaking, but in the very least they're an e-commerce like platform of sorts.

At WeWork tech is so secondary to their requirements. Sure, they can make it more and more required -- just like fridges do these days. But for WeWork the tech is about as necessary for you to derive value as a touchscreen on a fridge is necessary for you get get value from the fridge. _Just because it relies on technology doesn't make it important to it_

Re: WeWork Isn’t a Tech Company

#54

Post by insulanus »

the_gastropod wrote: post #42
mrtksn wrote: post #32

I really don't understand the negativity on HN towards WeWork. In principle, how it is different than AirBnB or Uber in regard of being a tech company? It's not like Uber or AirBnB's core compentancies are tech, I'm sure WeWork can also build a dev team making frameworks and research that some day might be used in their core business. The article argues that the difference is that Uber, AirBnB, Yelp, Twitter is a tec…

> In principle, how it is different than AirBnB or Uber in regard of being a tech company? It's not like Uber or AirBnB's core compentancies are tech, I'm sure WeWork can also build a dev team making frameworks and research that some day might be used in their core business. Some day, maybe they could?! But their current business is selling short term office space leases. They have massive liabilities in their long-t…

Good description. Uber is making use of people's free time, and their car (a very expensive asset) at low rates. They can cut or hire a driver at any time, and they also control the pricing both ways.

WeWork only controls pricing on the customer side, and office space leases are way more cumbersome than the Uber driver contract (I shudder to think what that looks like).

Re: WeWork Isn’t a Tech Company

#55

Post by Fej »

mrtksn wrote: post #32

I really don't understand the negativity on HN towards WeWork. In principle, how it is different than AirBnB or Uber in regard of being a tech company? It's not like Uber or AirBnB's core compentancies are tech, I'm sure WeWork can also build a dev team making frameworks and research that some day might be used in their core business. The article argues that the difference is that Uber, AirBnB, Yelp, Twitter is a tec…

> Maybe you have an empty flat, you can turn it into WeWork location by furnishing the place

Zoning, perhaps?

Re: WeWork Isn’t a Tech Company

#56

Post by WhompingWindows »

baddox wrote: post #26
paxys wrote: post #10

I like that WeWork is finally forcing us to have the conversation about WTF a "tech company" even is. A company that sells software? Or one that employs a lot of engineers? Or companies that use a lot of tech in their operations? Companies with a presence in San Francisco and Kombucha on tap? Are big banks tech companies? Insurance providers? Hospitals, auto manufacturers, oil and gas... What isn't a tech company?

Is it really that important to define the term precisely? It doesn't seem like the term is used precisely, so what's the point in defining it precisely?

Because tech makes VC and big money investors salivate and throw cash down, whereas real estate is ho-hum, risky, boring, etc. WeWork desperately wants that tech label to justify their terrible balance sheet.

Re: WeWork Isn’t a Tech Company

#57

Post by duxup »

paxys wrote: post #10

I like that WeWork is finally forcing us to have the conversation about WTF a "tech company" even is. A company that sells software? Or one that employs a lot of engineers? Or companies that use a lot of tech in their operations? Companies with a presence in San Francisco and Kombucha on tap? Are big banks tech companies? Insurance providers? Hospitals, auto manufacturers, oil and gas... What isn't a tech company?

I've seen a lot of blurring the lines.

A company a while back was totally "blowing up the biotech space" (it was a random fairly empty article) ... I was curious and looked and they basically made a crud app... that could be used by a biotech company.

That's not to take away from whatever they were doing, but as far as I could tell they were as much in logistics as they were .. "a biotech start up".

Re: WeWork Isn’t a Tech Company

#58

Post by WhompingWindows »

kolbe wrote: post #9
adamc wrote: post #7

Earlier quoted context omitted.

Rich people who buy non-tech-company stock and tech-company valuations seem likely to become less rich over time. An index fund might be a sounder investment.

When the time is right, Adam will change the company voting structure and get WeWork put into the S&P 500. If all goes well, it will be at a $500b mkt cap, and everyone in VOO and SPY will be the ones paying that price.

Incorrect, You don't just "get put into" the SP500, you need to meet the qualifications first. I doubt WeWork will reach positive earnings and a market cap of 5.3 bln anytime soon.

--It must be a U.S. company.

--The market cap must be $5.3 billion or more.

--The public float must consist of at least 50% of outstanding shares.

--It must have positive reported earnings in the most recent quarter, as well as over the four most recent quarters.

--The stock must have an active market and must trade for a reasonable share price.

https://www.fool.com/knowledge-center/what-is-the-sp-500.asp...

Re: WeWork Isn’t a Tech Company

#59

Post by Finnucane »

quaquaqua1 wrote: post #18
paxys wrote: post #10

I like that WeWork is finally forcing us to have the conversation about WTF a "tech company" even is. A company that sells software? Or one that employs a lot of engineers? Or companies that use a lot of tech in their operations? Companies with a presence in San Francisco and Kombucha on tap? Are big banks tech companies? Insurance providers? Hospitals, auto manufacturers, oil and gas... What isn't a tech company?

>"What isn't a tech company?" It would seem that these days, Wall Street and private equity can agree that a "company that isn't growing" definitely isn't a tech company, even if it uses technology :)

I work in publishing, and we don't use _any_ tech. My job just involves standing out in a field yelling at clouds.

Re: WeWork Isn’t a Tech Company

#60

Post by dumbfoundded »

mrtksn wrote: post #32

I really don't understand the negativity on HN towards WeWork. In principle, how it is different than AirBnB or Uber in regard of being a tech company? It's not like Uber or AirBnB's core compentancies are tech, I'm sure WeWork can also build a dev team making frameworks and research that some day might be used in their core business. The article argues that the difference is that Uber, AirBnB, Yelp, Twitter is a tec…

The primary difference is the marginal cost of an additional customer. The definition of a tech company (at least for investors) isn't really about technology, it's about a near $0 marginal cost of adding an additional customer.

A great example of this is Facebook. For someone to sign up and start using Facebook, it really doesn't cost Facebook anything. Facebook probably only thinks about scaling in terms of orders of magnitudes.

Uber/AirBnb and other double-sided marketplaces debatably meet this definition. For these types of companies, the marginal cost of a new customer is $0. But these types of companies also have to onboard providers. Much of this is onboarding is automated but it can still require human intervention. Still, it's very cheap to onboard, there's not really any sort of capital expenditure that goes into scaling the provider side.

WeWork obviously has a giant marginal customer cost. This is the fundamental criticism of their business model. Lots of successful businesses like Amazon can do this but it appears like WeWork doesn't have any sort of scales of economy. For Amazon, you can put more products in the same warehouse, you can build warehouses closer to customers for faster shipping. WeWork pretty much can just open new locations with the same model.

Note that WeWork is trying to expand into other markets like gyms to get some of these benefits but whether or not this is a scalable business model is debatable. So far, it hasn't worked and there's not a great indication it will.

You mention that WeWork could change its business model to get better scalability. Of course they could change it but so could a well-funded startup. So could AirBnb. Frankly, it's a hypothetical that isn't proven out. Basing a valuation on a what-if that isn't a natural extension of what they're already doing is extremely risky. To do what you're saying, WeWork would basically have to start from 0, maybe with some expertise about what customers want. AirBnb could immediately launch the same service with 10,000 locations by leveraging their existing hosts.

How they got a $50B valuation seems deceitful and ridiculous. They conflate using technology and modern appeal with technology business models. Currently, WeWork does not have any business model that could be considered $0 margin customer cost. Maybe one day they could find one. Probably not.

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