Issue of the week: the Wework phenomenon
Wework’s headline-grabbing meat ban has raised some testing questions about its stratospheric valuation
The US office space start-up Wework has told its 6,000 employees that meat is permanently off the menu: nonvegetarian meals will be banned from expense accounts and company events. “Avoiding meat is one of the biggest things an individual can do to reduce their personal environmental impact,” declared co-founder Miguel Mckelvey. What a “perfect case study in virtue signalling”, said Felix Salmon on Slate. This “tyrannical” policy may save the fast-growing firm – which operates in 76 cities globally and has been valued at $20bn – some cash, and it may gain Mckelvey plaudits from other “woke” billionaires. But it will cause “a ridiculous amount” of bother for staffers such as the HR folks enforcing the policy in, say, Warsaw and Chengdu.
The move will cause “logistical nightmares”, agreed Virginia Postrel on Bloomberg. But, “given Wework’s business challenges”, there may be some solid thinking behind its “antimeat stand”. Nothing says “we’re a tribe” like food taboos – and this is an outfit with an identity crisis. Founded eight years ago by Mckelvey and CEO Adam Neumann, Wework is an unprofitable “real estate business trying to look like a tech start-up”. One way to give it “mystique” is to make it look culturally distinctive. The meat ban signals that Wework is “special”. But we already knew that, said The Economist. Thanks to the deep pockets of backers like Japan’s Softbank, Wework has become “the largest private-sector occupier of offices in central London and the second largest in Manhattan”. It deserves “credit for reimagining the conventional corporate office”. Operating like a sort of “capitalist kibbutz”, it takes on longterm leases and rents out space to shortterm tenants in “co-working” offices. Customers range “from tiny start-ups to giants such as General Motors and Samsung”. Each space is manned by a concierge who “curates events ranging from yoga classes to investor talks”.
Wework envisages a world in which there will be “global cities of We-flats and We-offices, where members work out at We-gyms, learn at We-schools and network at We-events – all the while tracked by the We-operating system”, said Lex in the FT. Yet the firm’s “steep valuation” depends on “a blinkered faith in its originality, despite a crowded market of competitors”. If its equity value was based on the same multiple of sales as its less glamorous peer, IWG (formerly Regus), “it would be worth $3bn”. Wework has yet to prove it can make money from property, let alone technology. Softbank’s willingness to talk it up as a $35bn or $100bn company has provided a “halo effect” the firm “has yet to merit” – with or without a meat ban.