You almost certainly know our next guest. He was the founder and CEO of We Work. He's now running a residential real estate company called Flo. He's trying to buy back his old company.
I hope you don't mind me saying there's a slight resemblance to Jared Leto. Adam Neumann. Adam, thank you for joining us. It's awesome to see you. Thank you for the general compliment. Yes, that is a compliment. A huge Oscar winner. Huge compliment.
Okay. So first of all, let's talk about we work. It's in bankruptcy court. A New Jersey court recently gave it back to its its creditors and essentially ignored your bid to buy it back. Is that the end of the of the story for
you? And we work. So we're first of all, thank you for having me. And we're just in the middle of all of it right now.
But just to explain a little bit more about it, our bid was 650 million. The bid that seems to be the one that they're considering to confirm at the end of the month is 400 million. It's a difference of 250 million. The number is very important. I'll explain the second way. To when in bankruptcy. And I'm learning a lot about I've never heard anything about it before. So it's on you. I didn't think bankruptcy was a beauty competition.
I thought bankruptcy was that is a line in your in your in your brief. Yeah. It's it is a lender. I thought it was whoever is going to give the best offer And when you base said you best, what is the other offer. What's the plan that they're showing. So they show a plan and they give numbers. And just to share a few numbers and the plan that's going to be presented to the judge at the end of the month, the plan says that the average rate to numbers that are very easy to track, average revenue per member and occupancy, the two numbers that the current plan is forecasting would be the highest numbers we have seen since 2019, which is as far as we can go, which I would call peak office and and with hockey stick and they would have to achieve those numbers by the end of this year, I'll say a little more.
The profit margin of the margin of the buildings would have to go from 16% margin, which is the last number that we saw right before it went into it, declared bankruptcy to 24%. That is 50% growth in margin by the end of this. And this is under your plan or the their plan, their part of this is you're saying it's going to be hyperbolic or I'm saying it's definitely unfeasible. But let me just ask you, I mean, don't the creditors have a legal requirement to, you know, to to take the best deal? So what is there something and you said it's not a popularity contest. So if it was, you know, what, if they looked at your deal and perhaps had a legal requirement and a very and very self-interested requirement to take the best deal, why what why do you think that they have bypassed? So we're maybe getting we're getting very technical, let's say one.
Don't think it's a technical question. Well, it is, because your real question you're asking is, is the judge obligated to take the best deal or does the judge get to choose what deal he's going to take? And I think it gets quite technical. But let's say something else just about back to what I said. From 16% to 24%, 50% growth in one year, and without spending any money on an old on a business that now has aging buildings in what I think is one of the worst office markets maybe in the history, but definitely of the past 40 years. Look around just here in San Francisco. But it's a global phenomenon. If they achieve these very rosy plans that I think are unfeasible, they would then need to in 2025, grow from that to not go cashflow negative.
What I'm really telling you is that the plan that they're planning to approve or if they're approved hasn't happened, would be a plan that takes the company cash flow negative less than 12 months from when it came out of bankruptcy. And we're planning to show it in the depositions to have a chance at the confirmation and you can take it as far as that. So this isn't over. This is not Well, we do love a redemption story in Silicon Valley. Of course, Steve Jobs famously went back to Apple. But what would you do with rework and
considering the obstacles that it faces with the economy and work from home, what is your vision? So I think the only reason we were even interested in we work is only because of flow as flows think. Why don't you describe what flow is so flow? I'll just take it a little backwards. Are we going to go by that clock or. But you leave that to me, okay? Yeah, because that because I need to manage the questions, but answers roughly. Yes, Roughly so. Because I'll give you the short version. Okay. Well, the very short version.
When I moved to this country in 2002, I lived in an apartment building with 135 apartments. The first thing I noticed is what? The neighbors weren't talking to each other. I had this great idea, Why don't we create a company called Concept Living? And I was in CUNY University. I had four other students with me. We went to the entrepreneurship competition and we didn't go to the next stage. I remember going to the dean.
I said, Mr. Dean, and then you can reverse whatever happened. But why didn't we go to the next stage? What a great idea to bring community into buildings would have increased. And no, I would have made people pay my rent. And it goes on. An entrepreneur can't go and disrupt an industry of that size. Interesting lesson from that is when if
you are right now an entrepreneur, if you're right now a dreamer, if you are right now as a student and you have something you really believe in, don't let anybody stop you. The worst case scenario is you will fail and you will learn great lessons. They will then apply to the rest of you. But that's one taking in 22 years forward to today. 70% of today's, a 40 year old and younger in America are renters.
They spend 34% of their total income on rent. Not only that, we live in a time where we're so connected digitally, digitally. And we just heard in the panel how more connected we're going to be. We've never been more disconnected physically. There's loneliness, there's mental illnesses because vision is oneness, oneness between a person and themselves, their neighbors and their world. We deliver that vision by building a vertically integrated company.
We build our own tech, we manage our own buildings. We honor our own buildings and its own brand. Just to explain why that's so important. Traditionally, landlords would be landlords and they would use third party providers to build a technology for that. Those third party providers, because they're not the owners, would build what they thought was best.
These third party provider technology companies are based on accounting system flow has to rebuild the architecture to be able to base it on whatever we think is most important and to deliver our mission. What's most important is actually the resident, the human being. By putting the resident first and building this very flexible architecture, we're able to do almost anything we want in the building.
And I'll just give one example community commerce. Our residents at one of our buildings, Flo, Fort Lauderdale, that's doing extremely well and is delivering on this promise. And the net operating income is up more than 30% since we took over, which in real estate terms is a very large number.
Our residents all have services, not all, but a lot of them. One is a yoga teacher, one is an accountant, one is an insurance salesperson, average age about 32, and they want to rent, they want to give these services. They come to us. For now, we're putting it through two different things, but it's all getting integrated into the app. They say what their services. Now you're another resident. You would like to buy or consume that service and we connect to and put you together from the moment you go to flow and you guys can take out flow it flow that life.
You go to the website, you want an apartment 61 community, Do you like pets? Do you like wellness? If you like wellness, do you like meditating or do you like lifting weights? And whatever the thing that you're going to say that you chose to tell us, we're going to know about you, then when the next event is going to happen, we're going to prompt you and offer it to you. And by doing these little things are allowed to really deliver on this mission. As an entrepreneur, I get the bug. Usually every day I try to stop into every month.
I'm looking at my CTO right now. He has to build a system that's ready to receive all these ideas without building the architecture the way we did, you would not be able to deliver on our promise. Enormous. When Andreessen Horowitz invested 350 million in this new idea, you could kind of hear the collective gasp from the tech press because they were betting on you after a quite public experience with We Work. Why do you think they made that investment? First of all, that's a question from Jason Horowitz. But and I know Ben has spoken a little
bit about it and said different things, also something that not everybody knows. We also put in 350 million ourselves. So it was really done. And you had some of these apartment buildings already. I did. And we chose the best ones, the ones we sold. We chose the best ones and continued them to the company and created perfect alignment between us.
And we said, But I happened to be coming back from a board meeting right now. We had one two days ago and our board meetings are amazing. Mark is our board member. Ben joins the meetings and we all sit around the table. We suggest we talk about whatever it is.
And without getting into details again, my CTO here had quite an experience. We presented everything we're doing. Everybody was so excited and then we gave an idea of a new thing we want to do in 2025 and Mark and Ben, based on 30 years of experience and a lot of investing, they didn't think it was a good idea and the speed in which they communicated it, the strength in which they pushed back and the conversation around the table was just something that I wasn't used to. It's the kind of partners that you need. These are not just tech investors. The best, I think, in the world.
These are entrepreneurs who have built multiple businesses and the mix, the combination of them with everything they do best, and the team and myself, everything we do best comes together. I think it's the right business at the right time. And interestingly, I'm also hearing sort of implicitly that maybe you didn't have that same kind of board relationship at We work and that a little bit of friendly pushback is always a good thing. So you're saying friendly pushback? The pushback is so friendly because we're all we're partners and friend. Yeah, there was it was Masayoshi Son and his colleagues doing the same thing.
And we were all just one was thinking about Mark and Ben for those of you know then the pushback. Israel It's not a soft pushback. It's a real pushback. And that's what I want as a partner. I'll give you one fact about my board from before for nine years, and it's in the board minutes. Every single decision that was. Ever brought up in the board was unanimously a yes. Not one time in the record. Was there a note until the time when I said, I'm stepping down and that was it. Vote.
That was a sales. Let's bring it back to work. So you've described the flow mission, you know, which is residential focused and community focused. So tell me where a co-working company in a challenged real estate market for that kind of office space where where, where you think it fits. So the way I see the future of living, the future and post-corona world, I think we all understand this. And actually we're sitting right here in San Francisco.
It happened here in New York almost more than anywhere else. The speed in which people started working remotely and successfully worked remotely was unbelievable and I think surprised a lot of people. But we also learned after Corona that the home for most of us is the most important thing. The future of living and the future of
work are intertwined. Who think of one without thinking of the other would be a would just not be solving the actual problem and you wouldn't be able to deliver on the full mission. The only reason we were interested and we were the only reason we are interested is as part of flow. So it was going to be an SPV. Below flow. Flow is going to deliver the technology.
That same flexible architecture doesn't work just for living. It works for office. It actually works for anything in real estate. And with and we had a group of extremely talented investors that were coming behind it.
This was not flow with spending its equity on that. This was actually raised externally and the hybrid of those two would be able to give a future. We work a plan that's actually sustainable. The current plan on Facebook, is there a one even fraction of a kind of personal element for you, of a return of a redemption? We didn't speak about this question in advance. It's
an. There. You can say that something that you've spent so much time on and I didn't just spend ten years of, we weren't only work. There is a team of over 10,000 people who gave their heart, body and soul to build. Of course, there's a lot of emotion, but part of what I learned and I've learned a lot of things, but part of my biggest lesson we as human beings tend, many of us, to take the past, wear the glasses of the women narrative, and we tell ourselves that narrative. And when we look at the present, we're looking at it with the narrative of the past. The problem with that is you're not actually in the present. The thing about the present that's so
exciting, it never happened before. And if you don't come into it with a fresh set of eyes and are completely you and I were right here, right now, nothing else matters unless we're doing it this way, you don't actually get to experience life. So is there emotion? Of course. Would I make this decision at all
because of some comeback story? The reason I really didn't want to look at the way we work was because of that. And the only reason we started getting interested, the more we heard their story, the more we heard their numbers. We're like, They've never done this. They are wrong. And it is a big still after everything, a big global brand. But so there is emotion. But I don't make decisions that way. And if I can share something with the audience, try to leave the present like you're seeing it for the first time because you are, and then you will really be living life to its fullest. I do enjoy how you bring these kind of
quasi spiritual mission statements and the and the things. I don't know. I guess I wouldn't call it a mission statement. I would just call it observation. And again, I think all of us as human beings, we tend to do what's easiest.
It's much easier to bring with you the past into the present. It's much scarier and takes a lot more courage to just be here now. One of the reasons why no one has ever built a national residential real estate brand is it's it's difficult. Requires a ton of money. Regulatory, regulatory differences in every market.
The details of maintaining owning properties is not not trivial. Where why can you succeed in a spot where probably a lot of others have looked at it and decided, No, thank you. It's also an incredibly volatile market. So the other thing about this market, it's a market where some in the right locations, it's a market where supply is much smaller than demand. So because demand has always been greater than supply, the most successful landlords didn't need to build a brand. The buildings were full anyway.
But going back to what I said before, the fact that 70% of this young population is spending a third of their income on it, they deserve a better solution. When they get a better solution, they're going to get the feeling when they have that feeling, that's the beginning of a brand. Before we did this without looking too much of the prism of the past, we did build a office brand in the second largest asset class, and it was a national, it was global. It faced a lot of the same challenges. I'll tell you, the one observation that we have, it is easier to bring community bring people together in their residential building than it ever was in an office, because in a residential building, it's nighttime. You went upstairs, you could stream your
content, it could be on social, or maybe you actually want to go downstairs and see other people are. In the past three months, we've hosted hundreds of events. 40% of all of our residents have attended the event. But the number I like more, 38% of our events were thrown by the residents. So we're really creating an environment
where they can choose what they do and what they don't do. And people seem to choose again and again to want this face to face connection and not just the digital. Are you being at all more careful in pitching flow as a technology company? Because I recall it was one of the things that around we work investors kind of rejected the idea that that was a technology company, tech technology. So in general, the way I live my life is I'm doing the things that myself and the team know are correct. I'm not building this for what investors are going to say. I'm building this to give an experience that I think I'm very well positioned, that the team is very well positioned to give.
We've done it before and we're going to do it much better this time. But back to the tech, you cannot deliver on this promise and our mission without doing the tech the way I said. What I explained about architecture is really important. If you have architecture based on accounting, you're just not going to be able to do things based on building community in architecture. I'll give you another thought that maybe is not common. We have 160 employees. 51 of them are in tech, mainly engineers and a small group of product leaders and designers. So you cannot solve a big problem in
today's world without it. But I don't need to label it this or that, label it a real estate company. It's the largest asset class in the world. There is no brand, but our tech is what's going to help us deliver this promise.
Are you a different kind of CEO now than you were? We work. I mean, you did mention the different relationship with your board. How else have you evolved? So I hope in many ways growth is. A complicated thing.
What I've learned is you can really think about how much you are growing if. When you find yourself in the same situation, I think we all would like to be better, but then we get to that very stressful situation. We bounce right back to that old challenging self of ours.
I believe I did, and there's many examples of things that change. But you already gave one. Have investors around the table that are not just comfortable pushing back. I think they like it. So it's a very we have a great relationship and we're really building this together, which is one, but I think another one that a mutual friend of mine of ours or I'm not sure is actually not my friend, someone I know and someone that, you know, gave me.
He saw me speak in a conference and he told me either I'm going to give you a little bit of advice. I said, Of course. And he said, But I don't know you so well. Is it okay if I just jump to conclusions? And I said, Please do. And he said, because he's a very is, I
think, the best sea on the planet. This is this is. Mr. Business. Okay. Business to business. Okay. Blazers in.
And I didn't know him, and I was so happy that he wanted to give me any type of advice. So I said please. And he said he'd give an example of another entrepreneur that he really respects, another great entrepreneur. And he said, you know. There's two different versions to people. There's the version you are when you talk to the world, which is where you do what you do and what we're doing right now and when. Yes, there is a lot of clarity about where we're going.
It is said when someone with your personality is sitting in a meeting with your tech team, with your design team, with the ops team, and you're talking about a problem, if you're going to be the first one to say what you think. There is nothing you can do except affect everybody else. And what their answer is going to be says either. My advice to them, even if you don't take my advice, this is the biggest asset class in the world. It doesn't have tech. It doesn't have a brand. I think you're going to do really well. We told you to talk last in meetings. He said, If you can help yourself and be
the last person, you help yourself. So that would be a question for my team. I remind you, I'm getting a thumbs up from the CEO. So I remind myself all the time, and when I don't, I take a moment, I take a deep breath and I do it again. If I want to succeed in the way that I want to, for all of us, but also to deliver on this mission, but also for all of our partners and all of our employees, I have to learn how to do that. I'm sure I'm doing it better. I'm sure there's a long way to go. Okay. Two more questions and we'll try to go quick.
One of the things that brought, you know, journalists like moths to a flame, to the We Work Story podcast and the TV show the books was a kind of a narrative of excess, in excess of charisma, of camaraderie among employees, you know, capital raise, certainly. Do you think about that at all, or do you think differently about excess in the kind of company you're building? So there was like three questions and one question in a short time. Let's let's let's let's do that is to say one word about it. Our capital was raised from the smartest investors on the planet. We didn't have any grade B investors. We had the best of the best. We had Goldman. We had Jp morgan. We had fidelity.
We had I can give the list. The list goes on and on and on. And so they're very smart people. And they choose to they they choose to invest. And SoftBank came in and, yes, gave a very large investment and we saw it in other places. But all of that all of that is one. But the other thing I would say with all day, everything that has occurred since the amount of X we were employees that have applied to flow, the amount of and we were working, it's only hundred 60 employees. So there's a small group, but they're in
flow. Most of the employees are new, but the best of the best, most of them are with us. And what I hear every single time in Corona, remember that happened 2019, then Corona happened, then everybody was alone at home. The amount of people who say that this is the best time they've ever had in their life, career wise, Commander, you said, come on, that friendship, partnership we build. And I think it's important to remember we changed the category. We built a global brand. We became You used to read lineup television, so I can name all the different things that happened. We became part of pop culture.
It's not obvious to build something of that magnitude and of that side. We said before, Did we make mistakes? Of course. Could we have done things better? Always. But I am taking a lot of lessons from the past. But I'm not. I don't for a second.
Underestimate the level of achievement that was achieved. The team that did it, and you'll see is very hard to replicate. Okay, last question. Change topics. You're from Israel. You went to Iraq. You attended a lived in a kibbutz only miles from where the October 7th attacks happened. I just feel I would be remiss if I didn't ask you, I think specifically what you're taking now from the protests that we're seeing around the world, particularly particularly in the U.S.
at college campuses. All right. Taking a second, because this is. Yes, very different topic. Very important topic. When. It started. And I'm going to take Colombia as an example because I happen to know that you went to Colombia. When it started, I was extremely
concerned. And what I do when I'm very concerned, I start asking questions. I don't ask just my friends that I know in Colombia whose kids are Jewish that are going there. I actually ask everybody else from all religions, from all countries, from all states, for relationship with people all over the world, and not just people that are here, but people that are running countries. And I kept asking again and again, I said, Well, what do you think? The more I talked to them, their more they said, you know, the ones we really think we think these protests, instead of helping achieve the voice that they're trying to have, they're actually hurting. The other thing they told me is take a good example with Colombia.
It ended up being a few hundred people that out of them, maybe half weren't from there. And as we just spoke about, I've always been about bringing people together. I've always been about community. Of course, I agree and believe that we should have not just two opinions to every topic, but five opinions. But we should do it in a way that brings
people together and brings people around the table for a discussion. We should not bring hate. We should not bring violence. And to to touch on that a little more. When I think of those young students,
young, I think is the right word that all of us some of you are young right now, and all of us were young at some point. And I still like to feel young, but that time is moving. And when you're young, you're just developing your opinion. We live in a world where we can find any support for any opinion. We have center, right or left, no matter
what their support for it, that you can find the biggest story and another million people thinking the same way you are for these young students. I hope over time they'll develop their own voice. They'll find their own time to collect information, they'll get informed, they'll understand that when you look at something from the outside, you never know what's actually happening on the inside. And I really hope and wish that that will happen.
And they have time. The professors, on the other hand, when I think of that, I'm extremely concerned. We will leave it there. Adam Neumann, thank you very much. Thank you very much.
2024-05-15