Adam Neumann was flying high. Literally.
His office-rental giant WeWork was months away from being valued at $47 billion. Revenue was doubling annually. And Mr. Neumann was zipping across the Atlantic Ocean in a Gulfstream G650 private jet with friends last summer, smoking marijuana.
After the group landed in Israel and left the plane, the flight crew found a sizable chunk of the drug stuffed in a cereal box for the return flight, according to people familiar with the incident. The jet’s owner, upset and fearing repercussions of trans-border marijuana transport, recalled the plane, leaving Mr. Neumann to find his own way back to New York, these people said.
Since Mr. Neumann co-founded WeWork—recently renamed We Co.—with Miguel McKelvey nine years ago, he has led with unusual exuberance and excess. His combination of entrepreneurial vision, personal charisma and brash risk-taking helped the company surpass $2 billion in annual revenue, and made it the country’s most valuable startup.
Now many of the same qualities that helped fuel his company’s breakneck growth in the private market are piling up as potential liabilities as the company prepares to go public—helmed by a CEO who looks little like a typical public-company chief.
Mr. Neumann muses about the implausible:
- becoming leader of the world,
- living forever,
- amassing more than $1 trillion in wealth.
Partying has long been a feature of his work life, heavy on the tequila.
Public investors are increasingly skeptical of the formula that has worked for Mr. Neumann so far: his pitch that We is far more than a real-estate company. With its rapid growth and use of technology, he argued, the company deserves rich valuations normally reserved for tech companies.
Instead, many potential investors now see a fast-growing office subleasing company with losses of more than $1.6 billion last year.
Since We filed the prospectus for its initial public offering last month, it has been besieged with criticism over its governance, business model and ability to turn a profit. It is now expecting an IPO valuation as low as a third of the $47 billion sticker price it garnered in a January funding round—a drop without recent precedent. This week, We postponed the offering until October at the earliest.
Wall Street and Silicon Valley investors have been dismayed by the number of potential conflicts of interest disclosed in the “S-1” IPO prospectus, including Mr. Neumann leasing properties he owns back to the company and borrowing heavily against his stock. Even some of We’s private investors said they were angered to learn that an entity Mr. Neumann controls sold the rights to the word “We” to the company for almost $6 million—before public pressure led him to unwind the deal.
“This is not the way everybody behaves,” said Dick Costolo, former CEO of Twitter Inc., who led the company through one of the larger tech IPOs of the past decade. “The degree of self-dealing in the S-1 is so egregious, and it comes at a time when you’ve got regulators and politicians and folks across the country looking out at Silicon Valley and wondering if there’s the appropriate level of self-awareness.”
Given the prominence of the IPO, he added, “that is a big problem.”
Mr. Neumann, 40, declined to comment through a spokesman, who cited rules surrounding the planned IPO. Mr. Neumann told We employees Tuesday the process had been humbling and he would learn from it, say people who heard him. We executives have previously said he is strongly devoted to the company, and many of his personal transactions were made with the company’s best interests at heart.
This account is based on interviews with current and former employees, investors and friends who interacted with Mr. Neumann as he built We.
For startup investors, the 6-foot-5 Mr. Neumann has always had the qualities they crave in Silicon Valley founders, despite being based in New York. He is intensely ambitious and a masterful storyteller with a magnetic personality who can inspire and sell.
Raised in Israel on a kibbutz, Mr. Neumann moved to the U.S. when he was 22, where he attended Baruch College and tried to start businesses. One was a collapsible heel on women’s shoes that didn’t get off the ground. Working out of his Tribeca apartment, he started Krawlers, which sought to make baby clothes with knee pads to make crawling more comfortable. The slogan, he has said: “Just because they don’t tell you, doesn’t mean they don’t hurt.” It never gained traction.
He and Mr. McKelvey started a small co-working space on the side during the recession that followed the financial crisis and were amazed by the demand.
By 2010, they had started WeWork, with essentially the same core business model that exists today: They lease an office long-term, renovate it to make it hip and inviting, and sublease smaller desks and offices short-term.
Finland has been testing a basic income for 2,000 of its unemployed citizens since January, and UBI proponents say the Nordic country is providing an example for the U.S. It will be interesting to see the Finnish results, but Americans shouldn’t read too much into the outcome of a small-scale, early-stage trial. Look instead to Saudi Arabia, which for decades has attempted the wholesale replacement of work with government subsidies. Perhaps more than half of all Saudis are unemployed and not seeking work. They live off payments funded by the country’s oil wealth... Regular citizens lack dignity while the royal family lives a life of luxury. The technocratic elite has embraced relatively liberal values at odds with much of the society’s conservatism. These divisions have made the country a fertile recruiting ground for extremists... At the heart of a functioning democratic society is a social contract built on the independence and equality of individuals. Casually accepting the mass unemployment of a large part of the country and viewing those people as burdens would undermine this social contract .... It would also create a structural division of society that would destroy any pretense of equality.
.. UBI supporters would counter that their system would free people to pursue self-improvement and to take risks. America’s experience over the past couple of decades suggests that the opposite is more likely. Labor Department data show that at the end of June the U.S. had 6.2 million vacant jobs. Millions of skilled manufacturing and cybersecurity jobs will go unfilled in the coming years.This problem stems from a lack of skilled workers. While better retraining programs are necessary, too many of the unemployed, or underemployed, lack the motivation to learn new skills. Increasingly, young unemployed men are perfectly content to stay at home playing videogames.
.. Perhaps it could work as only a supplement to earned income.
..In the same Harvard commencement speech in which Mr. Zuckerberg called for a basic income, he also spent significant time talking about the need for purpose. But purpose can’t be manufactured, nor can it be given out alongside a government subsidy. It comes from having deep-seated responsibility—to yourself, your family and society as a whole.
Dana Carvey of “Saturday Night Live” used to do a funny impression of President George H. W. Bush, in which the character would justify his own supposed timidity by muttering “wouldn’t be prudent” to himself about every small risk. The impression neatly captured the contemporary notion of prudence: faintheartedness, caution and a general bias against action.
.. The connotation of prudence as caution, or aversion to risk, is a modern invention. “Prudence” comes from the Latin “prudentia,” meaning sagacity or expertise. The earliest English uses from the 14th century had little to do with fearfulness or habitual reluctance. Rather, it signified righteous decision making that is rooted in acuity and practical wisdom.
.. We have refashioned prudence into an excuse for cowardice, hiding behind the language of virtue to avoid what he calls “the embarrassing situation of having to be brave.” The correct definition, Mr. Pieper argued, is the willingness to do the right thing, even if that involves fear and risk.
.. to be rash is only one breach of true prudence. It is also a breach to be timid.
.. Once you start looking for this imprudently risk-averse behavior, you see it everywhere, particularly among young people.
.. True prudence means eschewing safety and familiarity in favor of entrepreneurial living. It requires clear eyes, a courageous heart and an adventurous spirit.
The ad agency’s flamboyant culture was a shock. “I was one of those button-down engineers who was quiet and held himself in the background,” Mr. Aradhya says. At his first client pitch meeting, a colleague from the creative department showed up in a pirate shirt. Another wore leather pants.
“They held court with clients, and they were completely respected,” Mr. Aradhya says. “I thought, ‘Hey, this is a new world.’
People trained in technology often have to sharpen their social skills to move into jobs that require selling, communicating or managing others. Mr. Aradhya made the shift by learning to explain technology to non-techies and polishing his image and conversational skills.
He traded his dark suits and button-down shirts for stylish shoes and bright-colored shirts, says Tonny Wong, his supervisor at Digitas. Mr. Aradhya also learned to talk about his complex work without making others feel intimidated, says Mr. Wong, now chief consulting officer at HackerAgency, a Seattle marketing company.
Introducing himself to strangers didn’t come naturally when he began attending events. “I had to force myself,” he says. Without a network, he says, “it’s impossible to scale or build anything valuable.”
.. You must “entertain, enlighten or enrich” people to attract positive attention to a brand, he says. He tries to do the same for people he meets, so they’ll remember him and help when they can...Mr. Aradyha began window shopping and researching men’s fashions online to figure out how to project a confident, successful image. He swapped his dark suits for jackets of crushed silk or woven with metallic thread, and wears exotic-looking designer shoes by Zota or Fiesso. The look shows he’s not afraid of taking risks, and tends to attract people who are curious and capable, he says. At many events, “I don’t even have to start a conversation,” he says. “People will ask, where did you get those shoes?”.. His style makes him a standout at tech gatherings where “the men are in rumpled shorts and man buns and T-shirts, and you’re tempted to ask them, ‘Have you done your laundry in a month?’” says Diane Darling, author of “The Networking Survival Guide.”“He’s a very memorable figure,” says Lexington, Mass., public-relations executive Bobbie Carlton.
.. He also says something outrageous now and then. The audience was dozing off at a late-afternoon program recently where he was a panelist. He was the last to introduce himself, and he jolted listeners awake by identifying himself as “the king of India” who also happens to run Novus Laurus. “He definitely woke everybody up” and drew a laugh