Note — Sep 29, 2019

WeWork and Counterfeit Capitalism

Excellent look at the WeWork debacle and, more importantly, at how access to capital and predatory pricing work and are so widely used right now by Silicon Valley and people with access to large amounts of capital, like SoftBank. I could have highlighted the whole thing really, have a read.

All of this, the faux philanthropy, the strange management choices, the personal behavior, and so forth indicates something very simple. I am going to be blunt, because it’s time to stop using euphemisms just because someone is rich and a business leader. Adam Neumann is not “quirky,” he is not “charismatic,” and he does not have “an unorthodox leadership style.” He is an untalented and abusive monster who lies to get what he wants. And he was given an unlimited credit line from which he could legally steal. […]

[JP Morgan’s] Dimon is a mediocrity who essentially got lucky his bank was too slow to get in on the subprime scam in 2006; he then used his bank’s incompetence at getting into the bubble as justification for how prudent he was. […]

The goal of Son, and increasingly most large financiers in private equity and venture capital, is to find big markets and then dump capital into one player in such a market who can underprice until he becomes the dominant remaining actor. In this manner, financiers can help kill all competition, with the idea of profiting later on via the surviving monopoly. […]

What predatory pricing does is to enable competition purely based on access to capital. Someone like Neumann, and Son’s entire model with his Vision Fund, is to take inputs, combine them into products worth less than their cost, and plug up the deficit through the capital markets in hopes of acquiring market power later or of just self-dealing so the losses are placed onto someone else.