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SoftBank Backs Away from Part of Planned WeWork Bailout

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Re: SoftBank Backs Away from Part of Planned WeWork Bailout

#61

Post by toomuchtodo »

wayoutthere wrote: post #60
toomuchtodo wrote: post #59

Earlier quoted context omitted.

It'll take decades to "fix" housing policy through upzoning and waiting for the existing population of homeowners to shrink (freeing up housing stock). I don't disagree that there are challenges due to the status quo, but remote work is a fix that can be implemented today and can help lift the wages of folks who might not otherwise be able to have those roles. You're not going to be able to change property rights in…

I agree remote work is the right way to go, but the affordable housing crisis can't be fixed through any other method than "build more housing". Every other thing that people propose is designed to protect property value by not building more housing. We simply have to make housing less scarce and yes, that will drive down property value. That's kind of the point.

Right, but until you have the ability to upzone or “build more”, it’s a moot point.

If you don’t own the land, and you can’t push through upzoning legislation, you’re not building more housing.

Re: SoftBank Backs Away from Part of Planned WeWork Bailout

#62

Post by joedevon »

daemin wrote: post #52
joedevon wrote: post #45

Earlier quoted context omitted.

Pretty good summary but I think you were a little off on the Softbank side of things. SB pioneered the practice, based on the concept of Blitzscaling, of pushing entrepreneurs to take an insane amount of money. WW's CEO likely convinced SB that it was a great idea, and then SB likely just ran it through their playbook of throwing money in. If you read up on SB, you'll hear several examples where they did this. Their…

So in that case Neumann was a damn smart individual, he saw the money flood coming and tried to siphon off as much as he could in creative ways. On one point, well done getting as much of the flood as he could, even though a lot of it was done in incredibly dodgy ways. Though these ways don't actually sound at all that ridiculous given some other accounting and financial practices that exist. He just got caught. On a…

Pretty much. I like to say there is a thin line between Steve Jobs and Elizabeth Holmes

Re: SoftBank Backs Away from Part of Planned WeWork Bailout

#63

Post by Lazare »

jeremyjh wrote: post #42
Lazare wrote: post #24

Earlier quoted context omitted.

It's a long story, but: First, sometimes people build (or buy) office buildings, and then lease the space in them to companies. Office buildings (and the land they're built on) tend to be very expensive, so landlords tend to be levered (ie, they borrow money to build/buy them), and they like to sign long term leases to try and lock in revenue so they know they can cover their loan payments. Companies like flexibility…

Is there any evidence SoftBank actually believed them? Belief was not required for SoftBank's business model to work (take it IPO before everyone figures out which end is up). They almost got away with it too.

That question is up for debate, but I personally believe SoftBank was naive (and incompetent) but legit. The concept of blitzscaling is not entirely absurd. If you've identified a market with strong network effects, there will likely be a single winner. If you can pick one competitor early in the process, and give them all the money they need to crush the opposition in exchange for a hefty equity stake, and you don't, say, get confused and accidentally fund a bunch of their competitors, then you can probably ensure your chosen firm "wins", and the returns could be very positive. It's not clear that SoftBank managed to ever execute that strategy correctly, but it's not obviously crazy!

Re: SoftBank Backs Away from Part of Planned WeWork Bailout

#64

Post by Lazare »

joedevon wrote: post #45
Lazare wrote: post #24

Earlier quoted context omitted.

It's a long story, but: First, sometimes people build (or buy) office buildings, and then lease the space in them to companies. Office buildings (and the land they're built on) tend to be very expensive, so landlords tend to be levered (ie, they borrow money to build/buy them), and they like to sign long term leases to try and lock in revenue so they know they can cover their loan payments. Companies like flexibility…

Pretty good summary but I think you were a little off on the Softbank side of things. SB pioneered the practice, based on the concept of Blitzscaling, of pushing entrepreneurs to take an insane amount of money. WW's CEO likely convinced SB that it was a great idea, and then SB likely just ran it through their playbook of throwing money in. If you read up on SB, you'll hear several examples where they did this. Their…

I'm aware of blitzscaling, but for it to work, you've got to be looking at a market with strong network effects - that is, a "natural monopoly". Selling office space is (to my eyes) clearly not a natural monopoly.

So my theory is that "we sign long-term leases on office buildings, then rent desks on short-term contracts" didn't sound like "we're fighting to become the single dominant player in our space", and so would not have qualified them for blitzscale funds. But WeWork never played up that aspect; instead they talked a lot about wanting to elevate the world's consciousness, being the world's first physical social network, and having maximum global impact.

Now to me, that sounds even less like "we're going to crush our opponents in a brutal winner-takes-all game to dominate the market for flexible office space, and we just new a few billion dollars to do it", and more like "we're trying to run a hippy commune but accidentally started a real estate company". But apparently to SoftBank it...did? And so they invested hugely, and we got a prospectus that said:

> We are a community company committed to maximum global impact. Our mission is to elevate the world's consciousness.

And everyone who was not SoftBank laughed very hard, and refused to invest. And I have to point the blame at SoftBank here. The logic if blitzscaling is that you pick a firm that, with enough resources, can dominate their market, and then you give them the resources. I don't think WeWork was even in that sort of market. This is like trying to blitzscale the market for dog walking or something.

Oh....right. https://www.nytimes.com/2019/12/10/business/softbank-wag.htm... :)

Re: SoftBank Backs Away from Part of Planned WeWork Bailout

#65

Post by joedevon »

Lazare wrote: post #64
joedevon wrote: post #45

Earlier quoted context omitted.

Pretty good summary but I think you were a little off on the Softbank side of things. SB pioneered the practice, based on the concept of Blitzscaling, of pushing entrepreneurs to take an insane amount of money. WW's CEO likely convinced SB that it was a great idea, and then SB likely just ran it through their playbook of throwing money in. If you read up on SB, you'll hear several examples where they did this. Their…

I'm aware of blitzscaling, but for it to work, you've got to be looking at a market with strong network effects - that is, a "natural monopoly". Selling office space is (to my eyes) clearly not a natural monopoly. So my theory is that "we sign long-term leases on office buildings, then rent desks on short-term contracts" didn't sound like "we're fighting to become the single dominant player in our space", and so woul…

Agreed. I'm just saying that SB pulled the wool over their own eyes rather than being victimized by these "visionary" CEOs.

Once you read this story, you'll see what I mean: https://www.bloomberg.com/news/features/2019-12-18/softbank-...

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