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WeWork and Counterfeit Capitalism

mattstoller.substack.com

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Re: WeWork and Counterfeit Capitalism

#71

Post by legitster »

_edo wrote: post #61
legitster wrote: post #35

> WeWork then used this cash to underprice competitors in the co-working space market, hoping to be able to profit later once it had a strong market position in real estate subletting or ancillary businesses. > This is of course Amazon’s model, which underpriced competitors in retail and eventually came to control the whole market. This is wrong, wrong, wrong. The difference is Amazon saw what the marginal costs coul…

> [Company] then used this cash to underprice competitors in [market], hoping to be able to profit later once it had a strong market position in [market]. This template appears to be one of the author's deepest understandings of capitalism. It wouldn't be so bad if I didn't look at his resume and realize he was Senior Policy Advisor and Budget Analyst on the Senate Budget Committee from Dec 2014 – Dec 2016. edit: als…

Yikes.

There's an intelligent conversation to be had for sure about how large firms like SoftBank are intentionally playing the market and unsavvy investors. This isn't it.

Re: WeWork and Counterfeit Capitalism

#72

Post by polygotdomain »

legitster wrote: post #35

> WeWork then used this cash to underprice competitors in the co-working space market, hoping to be able to profit later once it had a strong market position in real estate subletting or ancillary businesses. > This is of course Amazon’s model, which underpriced competitors in retail and eventually came to control the whole market. This is wrong, wrong, wrong. The difference is Amazon saw what the marginal costs coul…

>Amazon saw what the marginal costs could be, and had a specific roadmap to drive investment into bringing them down. WeWork fundamentally has no way to drive down the margin on real estate in any meaningful way. Especially as a lessee.

It absolutely has a way; hold landlords hostage. They've got another WeWork 4 blocks away. WeWork can walk, and leave landlords with a lot of space to lease and an expensive buildout to demo. It's quite likely that WeWork will use that as leverage to put pressure on landlords to negate rent bumps, add in a new concession, or just decrease their rent. Landlords will be in a tough spot because the option is to let the space go dark and collect nothing, or take a bit on the chin to have WeWork keep the lights on.

WeWork has a lot of long term leases, so it doesn't take many concessions for them to get their rent far below market in the years at the end of their lease. WeWork is playing a game of arbitrage on two sides; it's about risk with the landlords and about time with the rest of the market. That's how they hope to money.

Re: WeWork and Counterfeit Capitalism

#73

Post by JackFr »

chrisseaton wrote: post #3

Some of these criticisms are just irrelevant personal abuse - like saying he doesn't think Neumann's t-shirt is fitted well.

And describing Jamie Dimon as a mediocrity is simply ignorant. JPMorgan has outperformed all the big banks for the past 10 years, and it's not close.

JPM is tied up in billions of dollars of loans to WeWork, but those loans are commercial mortgages. Typically those loans are largely underwritten based on the building and real estate rather than focusing the borrower. Presumably the loans were made on the same terms they would be made to a REIT, based on what revenue the building can support. If WeWork fails, well then JPM owns the building.

Re: WeWork and Counterfeit Capitalism

#74

Post by 40acres »

For me, this whole WeWork fiasco has shown just how valuable the SEC and the S-1 filing process is. Let's be clear -- Neumann was fired because any investor who read the S-1 was mortified and wouldn't touch the company with a 10 foot pole. If anything, this shows how lawless the private markets are and the lack of guardrails that are present to protect private investors -- perhaps this will lead to some reform in the private market and more transparency, but either way I'm glad that the SEC provides such a breath of fresh air when evaluating companies with large valuations.

Re: WeWork and Counterfeit Capitalism

#75

Post by landivar2 »

> Part of what’s going on with WeWork is that monopolies and private equity have eliminated profitable opportunities for investment, which is why the Federal Reserve is increasingly powerless.

No, you are confusing "monopolies and private equity" with the natural result of Sarbanes-Oxley. If you make going public too costly... companies are less likely to go public.

Re: WeWork and Counterfeit Capitalism

#76

Post by human20190310 »

I really wish the author had sensed the limits of his argument, because I think the point he's trying to make is basically correct. He's just stretching it to the breaking point by invoking Amazon and the subprime crisis.

If he'd left the stretch goals out of it, it would have stood as a perfect foil to the avalanche of "meta-meta-meta analysis of everything except where the money's gonna come from" in the Stratechery article [0] also up on HN now.

[0] https://stratechery.com/2019/neither-and-new-lessons-from-ub...

Re: WeWork and Counterfeit Capitalism

#77

Post by JackFr »

ackbar03 wrote: post #24

The whole thing about subprime mortgages and how jp was slow to get in isn't entirely accurate. I mean I guess it could have been the actual reason since there's always a disconnect between management and the ones actually doing the work, but the structured credit team at jp Morgan was acutely aware at the time how the whole cdo business was going out of control. This was because they were also the team who invented…

He's simply wrong about that. Describing Jamie Dimon as a mediocrity is ignorant.

Re: WeWork and Counterfeit Capitalism

#78

Post by janee »

legitster wrote: post #35

> WeWork then used this cash to underprice competitors in the co-working space market, hoping to be able to profit later once it had a strong market position in real estate subletting or ancillary businesses. > This is of course Amazon’s model, which underpriced competitors in retail and eventually came to control the whole market. This is wrong, wrong, wrong. The difference is Amazon saw what the marginal costs coul…

> with the idea of profiting later on via the surviving monopoly

I don't understand...if you undercut your competitors so you're the sole survivor, I don't see how profiting is a obvious end result.

When you return prices to market value wouldn't competitors just appear again. Is predatory pricing really such a bad thing, I'd assume the market would just corrects itself later?

Re: WeWork and Counterfeit Capitalism

#79

Post by kmonsen »

socialist_coder wrote: post #36
bbddg wrote: post #27

Earlier quoted context omitted.

> And then whole blurb on Counterfeit Capitalism - which in essence described capitalism This is my favorite thing. Whenever someone describes something like "Counterfeit Capitalism" or "Crony Capitalism", it's always just describing capitalism.

I feel like this is similar to how Greta Thunberg recently described capitalism as "fairytales of eternal economic growth". That too is just describing capitalism. The way she is attacked by the Right, and what they say in their attacks, really makes it obvious that they know it's not an environmental issue. It has absolutely nothing to do with the environment or climate change. It's neoliberalism and capitalism and…

> Because the amount of CO2 emission reductions we need are clearly impossible with the current system.

Depends what you mean here, if you mean politically impossible because right people want to get richer and the easiest way to do that short term is do nothing, sure.

Technically from my understanding the climate crisis is very much solvable, but it is a giant coordination problem between very dishonest actors with zero trust.

Re: WeWork and Counterfeit Capitalism

#80

Post by iamkroot »

40acres wrote: post #74

For me, this whole WeWork fiasco has shown just how valuable the SEC and the S-1 filing process is. Let's be clear -- Neumann was fired because any investor who read the S-1 was mortified and wouldn't touch the company with a 10 foot pole. If anything, this shows how lawless the private markets are and the lack of guardrails that are present to protect private investors -- perhaps this will lead to some reform in the…

Why do private investors need protection? Why can't they be held responsible for the foolishness of their actions?
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