How WeWork Manipulated the Market

WeWork’s inability to secure investors for an IPO is a trending topic, with various individuals predicting that it will radically change market psychology. On CNBC, Robert Griefeld claimed that we are now living in a ‘post-WeWork world’[i]– as if human reality has been fundamentally altered by this incident. I agree that WeWork’s massive devaluation could change the manner in which we idealize rapid growth, which allows tech companies like Uber and Amazon to continue expanding and dominating markets in spite of the steady debt and/or net negative revenues they collect. However, I don’t believe much change will occur unless we understand how our societal values influence our market realities.

Our staunch belief in interminable growth[ii] is a large factor in why non-profitable companies can consistently ensure investment. Nonetheless, that only pales in comparison to how our value system itself allows entrepreneurs, CEO’S, investors, and celebrities to manipulate the market through overvaluation. For this reason, I want to expound upon WeWork’s failure and demonstrate the negative effects of our obsession with external value.

The founders of WeWork were well aware that in a consumerist culture, brand is everything. Because of this understanding, WeWork successfully stood out by making their office spaces and brand image more appealing than their competitors. And this tactic worked. In less than five years, WeWork swiftly became a household name, recognized even by those outside of their consumer base in spite of the fact that longer-standing companies such as Regus (IWG), Green Desk, and Impact Hub remain virtually unknown to those outside the target market. It’s largest competitor- IWG- has significantly less brand-value even though it has more members, more locations, a larger aggregate square footage of space, greater country distribution, and higher revenue/profit. Furthermore, despite beating WeWork in every relevant sector, it is valued at just shy of 3.7 billion, over 10% less than WeWork’s initial 47 billion valuation.[iii]

To many, this fact is quite surprising. But if we look into the way in which we place value in modern culture, a figure such as this shouldn’t shock us. In fact, overvaluation is common across all sectors of society, as perceived value does not necessarily correlate to inherent value. Take your average CEO, performer, influencer, or attractive individual. The attention and recognition that they get is- in general- highly exaggerated: A beautiful individual will get excessive praise due to their outward appearance, regardless of their personality, intelligence, and accomplishments. An influencer is compensated because of the amount of followers and engagement they get, not because of the quality of their content. A musician is recognized more for their image, name, and performance than they are for their artistic talent. A CEO will gain an exorbitant salary over their workers, regardless of whether their actions provide value to the company.

Now, that’s not to say that those who are recognized lack talent and a hard-work ethic. Unless you are born into wealth and fame, it takes a tremendous amount of effort, risk, and perseverance to achieve name-brand recognition. And nor is it to say that there isn’t any value to superficial traits. There is short-term worth to beauty, coolness, sex appeal, and image-branding. But that value is egregiously overstated and it can get devalued fast.

Which is exactly what happened to WeWork. It’s initial valuation of $47 billion decreased to $5 billion in a matter of months.

Yet despite the high cost of overvaluation, we continue to give positive attention to short-term value, cycling through companies and celebrities on a yearly basis. Social media platforms repeatedly get replaced for the newest, hippest model: MySpace, Facebook, Instagram, and now (perhaps) TikTok. Influencers fall out of favor for new ones in a matter of months. Pop stars are in the limelight for merely the span of a viral song or album. Even the value of giants like Google, Apple, and the United States of America sit atop a precarious throne.[iv]

Furthermore, when we compare top, long-standing companies such as Apple and Microsoft, or top, long-standing countries such as the United States and the United Kingdom, or top long-standing musicians such as Beyoncé and Lianne La Havas, a common link is found: their value is mainly derived from their perceived image, and the first is not inherently superior to the second. Apple’s products are not better than Microsoft’s, but they are more appealing. The United States is not a better place to live than the United Kingdom, but it presents itself to be. Beyoncé is not a better musician than Lianne La Havas, but her music undeniably possesses a greater external value.

So what is the lesson to be learned?

Well, maybe we should readjust our value system by inherently questioning the content we consume from recognized brands. In a culture that prioritizes external value over internal value, it is easy for us to get hoodwinked into the marketing tactics of name-brand entities. We consume art that doesn’t encourage profound thought or boundless creativity. We buy a phone or computer from a company whose expensive products have an increasingly diminishing quality. We immigrate to a country where the ‘golden’ opportunity is highly exaggerated and where hopelessness and homeless abound in staggering numbers. We invest a billion dollars into a company when their debt is high and net-revenue negative.

And so on, and so forth.

For humans often operate under short-term and communal principles. And when an individual or company understands that people will buy from them due to name-brand recognition, they no longer have to focus on providing quality to their consumers. Instead, they will focus on revenue, profit, and market domination at the expense of their customers until a new company takes over with superior strategy or products.

And the cycle then continues.

That is, until we as conscious consumers decide to break the cycle.


[i] CNBC Television. “WeWork has changed the psychology of the market: Virtu’s Robert Griefeld.” YouTube, 7 Nov. 2019, https://www.youtube.com/watch?v=hVX0McNfess&t=205s.

[ii] You can read my article on unbridled growth here.

[iii] Trainer, David. “WeWork Is the Most Ridiculous IPO of 2019.” Forbes 27 Aug 2019. Forbes. Web. 8 Nov 2019. https://www.forbes.com/sites/greatspeculations/2019/08/27/wework-is-the-most-ridiculous-ipo-of-2019/#495ce0f91ad6

[iv] (It’s important to note that this does not always correlate to market control. Facebook is not currently the in social media platform, but it has bought out in competitors such as WhatsApp and Instagram to maintain dominion over the market.)

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A Golden Toilet has no more worth than a porcelain one. It serves the same function.

 

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