How WeWork Changed the Idea of an Office

A review of "The Cult of We" tells many stories, and design is one of them.

Wework offices
WeWork in Williamsburg.

Spencer Platt/Getty Images

Treehugger has always loved the idea of coworking. It's what one of the first Treehugger writers, Warren Mclaren, would call a  PSS—or Product Service System—something that "you only need pay for the time you use it." Treehugger contributor Kimberley Mok wrote about coworking:

"...there's more to coworking than just "sharing desks." To make a coworking space actually work, there has to be a common vision, a shared identity of sorts, allowing for deeper connections between its members to happen, and a desire to develop an underlying support system that keeps people engaged and makes them feel like they belong."

And then we got WeWork, which was sort of coworking on steroids. It made no sense to me, having been in the real estate development business through a few business cycles. I wrote long before it imploded in a now-archived post:

"I have never understood WeWork, the corporate coworking behemoth. The idea of leasing long-term and subletting short-term made no sense, given that your tenants could disappear back to their bedrooms and coffee shops in minutes when the economy turned. It's what we used to call the 'midnight shuffle' when tenants were gone overnight."

I concluded: "WeWork is not a technology company. It's a real estate company, with bricks and mortar and $18 billion in lease commitments."

Cover of the cult of we

The Cult of We

So I looked forward to reading "The Cult of We: WeWork, Adam Neumann, and The Great Startup Delusion" by Eliot Brown and Maureen Farrell, both writers at The Wall Street Journal. What really happened? How did the idea of coworking get co-opted and turned into a monster that ate New York and many others cities?

Much of the book is about Adam Neumann and his excesses—his lifestyle of eight homes and expensive jets. But there is also a good analysis of what made WeWork spaces work. It was well designed and did not feel like old-fashioned offices. I had been in many "serviced offices" like those offered by competitor Regus; they were drywall boxes with plastic laminate desks and very little charm. Partner Miguel McKelvey, an architect who doesn't get nearly as much credit for the early success of WeWork as he should, designed these spaces very differently. According to Brown and Farrell,

"Even without bountiful communal space, it looked cutting edge. Rows of offices were laid atop diagonal wood floorboards, each office separated from the other by a glass wall with a thick black aluminum frame. Light streamed in from the windows, through the glass, and passersby could see into every office and conference room, each adorned with Ikea light fixtures. It felt more like a hip coffee shop than a sterile corporate cubicle farm."

Neumann pitched WeWork as a technology company, as a form of social network made of brick and glass. Investors ate it up, with firms "wanting to tap into the burst of well-educated young people opting to live in city centers." Tech startups loved it; big companies that wanted to look like tech startups loved it. There was only one problem for some investors: It looked like a real estate business.

Brown and Farrell write:

"Typically, venture capitalists don’t invest in real estate, because it can’t scale like a software company. The whole allure of software companies is that once they spend money to build their products, they can sell more and more software to new users at very low costs—sometimes just the price of sending a file. Profits grow exponentially."

Real estate is different. You have to build out each office and buy each desk. It takes time and money and it doesn't really scale. Brown and Farrell explain that "this is why real estate companies raise less money than tech companies and do so from non-software investors."

Lots of people in the industry didn't get it. The CEO of Regus, a company that almost went bankrupt in the dot-com bust and knew something about business cycles, thought he was doing pretty much the same thing. Some landlords didn't get it; I wrote earlier about Michael Emory, one of the smartest players in Toronto real estate and who owns all the best old brick buildings but wouldn't rent to WeWork, telling The Globe and Mail:

"Maybe WeWork will go from success to success. I have no real rational way of evaluating it. It is a very high-risk proposition for a landlord and an investor. At some point and time, some investor may be holding the bag on WeWork."

Meanwhile, the biggest investor of them all, Masayoshi Son, founder of Softbank came on board with billions, and WeWork was going to take over the world. The book becomes a different story, described as a "crazy train" that all collapsed when the company prepared for an initial public offering (IPO) and had to expose the real workings of the company with conventional accounting practices. And it turns out:

"By this measure, WeWork’s special co-working sauce wasn’t special at all. It was roughly even with the long-established competitor IWG, formerly Regus, which managed to be profitable overall, rather than losing 100 percent of its revenue."

The IPO got canceled, Neumann fled to Israel, and the party was over.

But Coworking Is Not Over

Locaal coworking spaces
Locaal, my neighborhood coworking space.

Scott Norsworthy Photography

The coworking party is not over; I continue to believe it is just getting started. Some, including me, believe the pandemic will lead to a boom in neighborhood coworking spaces, much like Locaal, the one nearest to my home.

Sharon Woods wrote in The Public Square:

"When we resurface, there should also be a notable increase in demand for flexible work environments in our urban places. Urban proprietors will be seeking flexible places and spaces to hold team and client meetings, break away from the home office, and collaborate on creative problem-solving. There will be a growing demand and need to integrate creative work spaces into the public realm."

The question always comes up: "Why is this on Treehugger?" The answer is that in a climate crisis we need 15-minute cities where people are not commuting miles to work, so we need workspaces closer to where people live. We need to share resources. And as Mok noted, we need spaces with "a common vision, a shared identity of sorts, allowing for deeper connections between its members to happen." We need coworking; we just don't need Neumann.

Other reviewers might do a better job on the business side; Christopher Mims, who has been mentioned on Treehugger many times, calls it one of the five best business books of all time, and that's high praise. I look at it as a parable about how greed destroyed a great idea, and hope that architect Miguel McKelvey got out with something.