Scandals Aside, What Business Is WeWork Really In?

Each month, “Ammirati on Innovation” episodes will look at ways
that the disruptive-startup mentality is spreading beyond young
entrepreneurs to big established corporations. Serial
entrepreneur, venture capitalist and Carnegie Mellon B-school
professor Sean Ammirati, who sits at the intersection of these
high-change dynamics, provides insight.


Episode 7


In this episode, Sean and I kick off with a new look at the
evolving WeWork and Softbank story. Sean explores what it means
that SoftBank chose to invest even more money into WeWork, and
now owns about 80% of the business. Plus, the fact that the
former CEO is making $180 MILLION during the transition! I think
we all can agree, that’s a pretty good consulting package.


In our last podcast episode, Sean compared WeWork to a real
estate business. Now he says it’s basically a rental car company:
they buy expensive fixed assets, and then they rent them out in
very short units of time. But there are still reasons for
optimism. For example, Sean says, Amazon has 5,000 WeWork desks
in New York alone.


We also debate whether the SoftBank decision to keep WeWork
running is a smart one. Are they following the sunk cost fallacy?
Or doubling-down on their belief in WeWork’s ability to lead the
transformation of work trend? Sean quotes hedge fund manager
Howard Marks, who says, “To be a great investor you need to be
two things: you need to be contrarian and correct.” SoftBank is
definitely being contrarian. Only time will tell if they’re also
correct.


Sean and I then jump to a discussion of a few of the Cloud Wars
Top 10 vendors. I have some questions for Sean about ServiceNow,
which now has Bill McDermott as CEO. You could argue that it’s
the #1 most innovative company in the world; it’s growing at 35%
and approaching a billion dollars in revenue per quarter.


Finally, we have a high-level discussion of innovation. Sean says
his employer, Carnegie Mellon, has been ten years ahead of the
world in AI – they were using self-driving cars in the aughts.
Innovation works differently everywhere. But some recent moves by
Microsoft, Amazon and Google to take a leadership position in AI
indicate that the time for widespread, non-stop innovation is
NOW.


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