'If you f--k up in the biggest ways, you can be redeemed': Silicon Valley just handed $350 million to the guy who crashed WeWork
In our current economy, it seems everyone has divided themselves into two camps: those who believe we're hurtling toward — or may already be in — a recession, and those who believe we're merely experiencing some temporary roughness as the economy readjusts to an open world.
The economic optimists on Monday got a big point in the "not a recession" column. You see, when the economy is in a recession, Silicon Valley venture-capital firms generally do not hand $350 million to ousted founders to reproduce their same failed idea in a slightly different market. Yet that is what happened when Marc Andreessen, a cofounder of the vaunted VC fund Andreessen Horowitz, announced a massive investment in Flow, a new real-estate company from Adam Neumann. Yes, the guy who flew WeWork into a $43 billion mountain.
In my experience, money this size does not gallop around financing whimsical projects like Flow during recessions. So perhaps this is a good — though extremely exasperating — sign for the economy. It is, however, also an embarrassment for venture capital, Silicon Valley, and the tech industry.
As one founder connected to the startup accelerator Y Combinator told me: "On the one hand, it is comforting to know that if you fuck up in the biggest ways you can be redeemed if you are a white dude who is also incredibly wealthy. On the other hand, I am not a white dude with existing wealth and connections, so I am saddened."
Neumann's "new" idea is, essentially, a rebrand of an idea he launched during the WeWork days, WeLive. Much like WeLive, Flow will own and manage apartments that come with Neumann's special, culty touch. Reading Andreessen's letter pitching this business was like watching one of those infomercials where a mundane task is made to seem like a tortuous undertaking — as if no one can crack an egg without breaking a finger and crying. He called renting an apartment "a soulless experience" and suggested that people in apartments are "hesitant" to "bring friends and family to visit" and lack a connection to their community because they have no equity in where they live.
Based on the letter, it seems Andreessen believes the core problem with housing in the US is a branding: Apartments aren't sexy or fulfilling enough, basically. But that is not the problem with the housing market in this country. The problem is that there is not enough housing supply, and so rents are skyrocketing. What we really need to do, as Andreessen himself said just two years ago, is build things. But Neumann's plan, so far, is to acquire existing buildings or partner with developments to turn them into giant McDonald's playplaces for adults. This is like telling someone with a broken arm that the problem is not that their arm is broken, it's that their cast isn't pretty enough — that it could use some pizzazz.
This is not the only time Andreeseen has demonstrated that he is not interested in real solutions to America's housing shortage. When the city of Atherton, California — where Andreeseen and his wife live — attempted to build more multifamily housing zones earlier this year, they wrote a scathing letter to the mayor and the town council. More multifamily housing, the couple wrote in a letter reported by The Atlantic, would "MASSIVELY decrease our home values, the quality of life of ourselves and our neighbors and IMMENSELY increase the noise pollution and traffic."
As I said, the real solution to the problem Andreessen and Neumann are pretending to solve is a lot harder than a rebrand — it's building. And building is what Andreessen and his wife asked their city to reject.
Failing to solve our housing shortage also has real implications for the most pressing problem in our economy right now: inflation. In a recent note to clients, analysts at Goldman Sachs said that while inflation was abating somewhat because of unclogged supply chains and falling prices for commodities like oil, it would remain "quite high for some time in official inflation data" thanks to the elevated cost of shelter.
Andreessen did write that Flow would offer renters an opportunity to build some kind of equity in their apartments, though he offered no details on how that would work financially, and other reporting seems sparse. The Wall Street brains I asked about that aspect of the plan took it with less than a grain of salt.
"I think the hook is going to be that renters get a microscopic share of equity that never amounts to anything and which they lose or could even possibly sell if they left," Vicki Bryan, a credit analyst who's the CEO of the research firm Bond Angle, told me. "The catch is they could never get a controlling interest. This is my guess. It's like buying from the company store."
Ah, yes, the ever innovative company store.
Dumb money for nothing
This Flow deal is one of the most efficient ways I have ever seen Silicon Valley light money on fire. Not only does this idea not fix a problem that our country actually has, it's going to be run by a person (Neumann) who grows a business with all the discipline of a 6-year-old on a sugar high let loose in a water park.
But it does seem like other Silicon Valley investors are getting a kick out of the staggering investment, which is the single largest check A16z has cut for a funding round. When the tech writer Eric Newcomer asked a rival investor if their firm had looked into investing in Flow, they scoffed at the idea.
"No — it's good to know there's still a place for utter insanity though," the investor said.
For the past decade or so, Silicon Valley has been awash with money, but the innovations it has delivered to consumers have stagnated. The scrappy energy of the early 2000s that appeared to be guided by a mission to add productively to the world around us has been replaced with a relentless greed.
Instead of focusing on the real problems facing the world, some of the best minds of this generation have spent the past two decades figuring out how to get a pint of egg drop soup to me as quickly as humanly possible. In this moment of economic and geopolitical uncertainty, that all feels like a total waste.
Into this precarious moment steps Adam Neumann, who perhaps best personifies all the excess and hypocrisy of Silicon Valley's supposed mission to help the world. Andreessen calls what Neumann did at WeWork a success. I quibble with that. Sure, Neumann made WeWork huge — a pop-culture phenomenon, even — but he never made a dollar in the business, and when it all fell apart he left a trail of jobless, shocked employees and baffled investors.
Neumann's really good at playing a trope you see all over the world of business: "the guy with the plan." He fooled Wall Street and Silicon Valley brilliantly and walked away with a huge sum of money. I suppose I can see the cynical appeal of that. But anyone who thinks the hundreds of millions of dollars he made from the WeWork fiasco taught him a lesson on "how to succeed in business" is delusional.
Andreeseen is doing his peers — and likely himself — a disservice. Once again, Silicon Valley's talk of wanting to solve real problems and empowering truly great founders from all walks of life to do it seems like just that: all talk. Money that could be used to create something productive for society and good for investors will be wasted on a branding exercise.
"A16z can't pretend to invest in things that matter anymore," the Y Combinator founder said. "They invest in their friends, and that's OK. You do you; the rest of us will go somewhere else."
Linette Lopez is a senior correspondent at Insider.
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