(We)Work is a Scam
What the fall of WeWork tells us about the unicorn economy and worker exploitation.
filed 21 January 2020 in
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If I say “start-up,” you get the idea: wide open windows with dramatic views, luxurious amenities designed to blur the line between “work” and “life,” meditation, hammocks, kombucha on tap, free staff T-shirts with cheesy catchphrases (“Thank God It’s Monday!”) and epically raucous parties. This is the millennial workplace: where, if the pleasure-to-work ratio has been calculated correctly, work is your favorite place to be.
Maybe you also have a sense of the typical successful start-up founder. Falling somewhere between blissed-out new age guru and frothing capitalist, the start-up founders most widely covered in the media tend to be young, unconventional (Always barefoot! Loves weed!), and cocksure, capable of sweet-talking their companies into massive, previously unthinkable valuations with grandiose visions of what their technology offers not just the market, but the world.
Our contemporary economy is predicated on a myth: the beloved brainchild of the overlooked (boy) genius, some ground- and rule-breaking idea that will change the world (and, of course, make gazillions). Icons like Steve Jobs and Mark Zuckerberg have created the legend—familiar to investor, consumer, and worker alike—that to “move fast and break things” is the way to get things done; that nothing is impossible if you simply say it isn’t.
And then Trump got elected, and the stock market soared while wages continued to stagnate, and 2019 became “the year of the scam.” Jia Tolentino wrote “
The Story of a Generation in Seven Scams,” and we obsessed over Elizabeth Holmes, and Fyre Fest, and Instagram influencers, and the dangerous mythology of Silicon Valley. But when WeWork—a co-working startup with a bananas valuation of $47 billion—imploded, announcing up to 4,000 layoffs worldwide, I couldn’t stop wondering: Could it be that the biggest “scam” of our generation is what’s currently happening to our labor force? And if so, why does nobody seem to care about it?
In 2013, venture capitalist Aileen Lee
coined the term “unicorn,”—that is, a start-up that accrues investments over $1 billion. If you don’t know the word, you’re at least familiar with some of the companies to which it’s been applied: Uber, Lyft, Airbnb, Instacart. On Fortune’s “
Unicorn List,” last updated in 2016, you’ll notice the names of some of the brightest stars of the “unicorn economy”—Spotify, Pinterest—plus companies that have proven themselves to perform less than admirably with time: Theranos, and, of course, WeWork.
When Adam Neumann and Miguel McKelvey co-founded WeWork in 2010, they pulled from a company they had already invented: “Green Desk,” billed to enthusiastic Brooklynites as an eco-friendly coterie of desks for rent, where the growing class of digitally-employed, remotely-sourced laborers could chip in their dues in exchange for workspace, plush provisions, and community. After selling Green Desk for a cool $3 million to their then-landlord, Neumann and McKelvey recalibrated the Green Desk model on a new scale: subtracting the environmental angle, adding a Manhattan office, and renaming their creation “WeWork.”
Neither Green Desk nor WeWork were unique in the world or even in New York for capitalizing on what is now commonly known as the “coworking space”—but both (particularly WeWork) managed to tap into the zeitgeist. By 2014,
Forbes reported that WeWork officially had become the “fastest-growing lessee of new office space in New York,” soon “the fastest growing lessee of new space in America.”
As its reputation grew, big names like J.P. Morgan Chase and Goldman Sachs threw their weight behind the skyrocketing company. At the same accelerated pace came reports of workplace dissatisfaction: Between 2015 and 2019, former employees of WeWork staged protests and filed lawsuits over
mass layoffs of the cleaning staff,
age and gender discrimination,
pregnancy discrimination, and
sexual harassment. Over time, Neumann eclipsed McKelvey as head and public face of the company, becoming an icon of unicorn capitalism with his long hair, cheeky smile, and love of marijuana.
Once SoftBank got involved, everything changed. The multinational telecom company and tech-investment firm, spearheaded by notoriously eccentric CEO Masayoshi Son, had been betting big on rising superstars since Son’s early investment in Alibaba, a holding company now worth about $420 billion. SoftBank’s “Vision Fund,” a tech-centric venture capital fund with literallythe world’s largest venture capital budget ($100 billion, and
a reported minimum of $100 million per investment) had already grabbed hold of Uber and Slack, hurtling the companies to the top of the market. It’s no surprise, then, that the impact of Son’s visit with Neumann was like two stars colliding.
In a meeting that famously lasted only 12 minutes, Neumann successfully convinced Son to invest $4.4 billion in WeWork. Writing for the
New York Times, Amy Chozick describes the beginning of what employees refer to as the “post-Masa[yoshi]” era, where Son’s “investment transformed [WeWork] from a mere unicorn into something with nearly unlimited ambition.”
You probably know what happened next. Neumann, already prone to inflated notions of WeWork’s potential (and let’s be honest, WeWork has never been more than a bougie office building where people pay to work while pretending they’re having a good time) was urged by Masa to ramp up the growth. Neumann and his wife-slash-co-conspirator Rebekah Paltrow Neumann (yes, cousin of Gwyneth) envisioned highfalutin offshoots of WeWork, and the duo officially renamed WeWork “the We Company.” In speeches to his employees and elsewhere, Neumann fantasized out loud about “We”-branded air, water, and outer space travel, banks, and a primary school.
With billions pouring in, Neumann not only promised exponential expansion of WeWork locations globally, but also sank massive sums into frivolous expenditures: a private jet, a makeshift spa for his office, an infamously lavish rendition of WeWork’s annual company-wide “Summer Camp” where Florence and the Machine and Lorde performed for masses of employees who had been flown out to the English countryside on WeWork’s dime.
One of Neumann’s most unhinged acts was to trademark the word “We” itself: a sleight of hand wherein Neumann convinced WeWork (aka, the company he founded and owned) to pay him $5.9 million for his “We” trademark (a name he had invented). As Bloomberg’s Matt Levine
pointed out, this is somewhat unusual: Mark Zuckerberg came up with the name “Facebook,” but presumably did not charge Facebook millions for naming it as such. Neumann’s ploy—idiotic? ingenious? deeply cynical?—was, he asserted, in service of his plan for the new “We” Company to “
encompass all aspects of people’s lives, in both physical and digital worlds.”
For unicorns, going public can be a risk, and entering the stock market has historically made unicorns of all sizes—Lyft, Facebook,
Peloton—take a hit. Nevertheless, throughout 2019, WeWork prepared for an initial public offering, a daunting venture that would inevitably invite close scrutiny of the less-than-immaculate WeWork finances. Even before the specifics were well-known, some media spectators from publications like
Forbes and
Vanity Fair urged investors to be careful, citing the company’s impossibly inflated valuation—which eventually peaked at $47 billion—and high risk factors like long-term leases that failed to anticipate real estate bubbles or recessions. Though WeWork had not yet turned a profit, analysts vacillated on whether that was significant: After all, most unicorns spend years in the red.
By September 2019, prospects for WeWork’s IPO stuttered. The company put Neumann’s private jet up for sale and announced major layoffs, potentially leaving one-fifth of its international workforce unemployed. In the end, SoftBank kicked Neumann to the curb. It took on 80 percent of the company’s shares, but not before giving the former CEO a generous severance package: the ability to sell off $1 billion worth of his shares in WeWork (an option not offered to other shareholders), plus $185 million for four years of consulting, and a modest short-term loan of $500 million.
Naturally, schadenfreude reigned. 2019 was a year full of
salacious grift coverage, from documentaries on Fyre Fest and Theranos to podcasts like Dirty John to the trials (both literal and figurative) of socialite scammers like Anna Delvey, Caroline Calloway, and Lori Laughlin. “2019 is the year of the scam,” the
Guardian announced, and we rejoiced.
While news swirled around WeWork, though, few likened Neumann’s mismanagement to Theranos CEO Elizabeth Holmes’s dishonesty or Fyre Fest, uh, visionary(?) Billy McFarland’s hubris. Why not?
Adam Neumann and his WeWork empire had almost everything a good grift needs: an “Emperor’s New Clothes”-style CEO who talks big and runs off with a lot, while thousands of employees are left jobless. Much like any good scammer, Neumann espoused a dogmatic and idealistic ethos while quietly practicing the opposite of what he preached. He emphasized that the company stood for
“‘we,’ rather than ‘me,’” then left his “community” (they were not, he insisted, his employees) fearing for their jobs while he cashed out.
And yet, coverage of the downfall of WeWork,
and the “conning” of its wealthy investors, has rarely considered in any great depth the WeWork employeesas victims of the scam—much like how coverage neglected to consider Fyre Fest’s Bahamanian contractors who will likely never see a dime, or the tragic story of Ian Gibbons, a biochemist at Theranos whose toxic relationship with the company has been linked to his 2013 suicide. Over and over, it’s the employees caught in the scam who consistently suffer the worst fates. And still, when these cons make front-page news, the shameful exploitation of the worker isn’t considered the “scam,”—at least not the one we like to gossip about. Why?
As I heard about the WeWork disintegration, I expected this angle to inevitably receive some coverage. But it didn’t, and still hasn’t, even after 2,400 employees
were finally laid off from WeWork’s sinking ship.
Inevitably, I began wondering: Why are we so willing to consider something a “scam” only when the consumer, and not the worker, is affected? In an economy increasingly dependent on unicorn start-ups, what can the downfall of WeWork tell us about the scams that await employees in the future? Finally, what can we as conscientious citizens—and current and future employees of scams and potential scams—do to protect ourselves?
Ultimately, and obviously, there isn’t an easy answer to any of these questions. Still, in the name of nuance, I offer five dynamics that I believe contribute to our culture’s limited view of “scams,” one which obfuscates the worker entirely—to our detriment.
Why Aren’t We Calling the WeWork Layoffs A Scam?
- It’s A Bummer
In an article for the Cut,
Katie Heany muses on the ongoing American fixation with con artists. She writes,
…With the biggest scammer of all well into his first term as president of the United States, seemingly invulnerable to being caught in any meaningful way, many of us are gagging to see justice (or even just shame) meted out elsewhere. It’s a temporary salve, a quick dose of serotonin that evaporates upon reading the news. Reminding ourselves that sometimes liars do get caught and sometimes thieves are punished makes it easier to believe that it could happen again.
When we fixate on defeated scammers in the Trump era, we construct a counter-parable, an affirmation that morality will triumph after all. For the rich to screw the rich—as Billy McFarland did to the attendees of Fyre Fest, sending influencers who had invested thousands in an exclusive luxury vacation to a deserted island with bad food—is hilarious and gratifying, because these instances, as
Lizzie Widdicombe writes, are “a train wreck—and a relatively harmless one.” To watch videos of stunned Fyre Fest attendees arriving at their FEMA tents is to feel vindicated in having known before the event took place that the whole thing was absurd.
For the rich to screw the poor, though, like the Bahamanian contractors working day and night with high hopes and no pay? That’s a familiar story, and distinctly not satisfying to watch, especially when our scam obsession originates from the combination of projection and escapism sought by many Americans post-Trump. By selectively defining “scam” to mean only those stories which reify our early articulations of an anti-Trump aesthetic, we continue to position ourselves as the gaping spectators fascinated by and contemptuous of crass, useless rich people. In our distraction, we often overlook the fact that the less “fun” scams tend to be at least as widespread as the dishy ones, with much more relatable victims.
2. It’s Not As Compelling as the Wronged Consumer
As
Stephie Grob Plante points out in a survey of consumer activism for Vox, Americans have loved us a good boycott since the Boston Tea Party. She writes: “Refusing to purchase British tea was a pointed way to voice their mounting resentment of their decidedly un-independent status. Short of revolt, it was the only power they had—until, of course, they revolted.”
Basically, a boycott tends to be a relatively short-term rebellion, one with wide appeal, and few or any possible penalties. But taking action in the workplace—such as unionizing—often comes with a real risk of losing one’s employment, or suffering other significant professional repercussions. When it comes to workers’ rights activism, people are less likely to identify, engage with, or even know about it, unless the union is particularly powerful or it’s happening right in front of them. As such, individuals wronged by the power of big capital find themselves without much more than a mid-size megaphone, shouting weakly from the outside, disempowered from within.
What’s more, consumer activism requires minimal time or energy. Though the impact of consumer activism can be significant, boycotts are typically temporary, dramatic threats using the abrupt tightening of purse strings and a threat to shop at competitors, reminding companies that their profits are at stake and the customers are in control. Boycotts rely on the mechanics of capitalism, often for noble ends, but they do not challenge those mechanics. In the case of WeWork, the company’s failure to remain financially solvent has resulted in mass layoffs, will likely inconvenience a number of enthusiastic “coworkers” worldwide, and has left wealthy investors hanging—but none of that is as viscerally compelling as the scammed consumers of Theranos, such as the sick patients who may have received false results from blood-testing machines that didn’t work. No real “customers” were harmed by WeWork, and a consumer boycott isn’t really possible or applicable in its case. The only people hurt were workers, and their only recourse is to find another job.
3. It’s Just Good Ol’ Exploitation
A person in power taking advantage of another person who labors for them is an ancient relationship, common in capitalism but long predating it. Beyond pre-existing prejudices and power relations that establish who falls where in the labor hierarchy, the introduction of new technological developments has usually resulted in a period of unfettered capital exploration, which in turn means gross exploitation, followed by a period of regulation until the next innovation arrives.
The Silicon Valley economy, the tech boom, and the start-up economy have given birth to our era’s particular monster: the unicorn. With unprecedented sums of money to further their new (read: unregulated) technologies, these start-ups also slash traditional workplace expenditures like overtime, benefits, and even standard hourly wages, increasing the stark inequalities between fragmented, relatively powerless workforces and the bosses who are suddenly richer than God.
Consider Uber, one of the more famous unicorns. Rather than call their workers “employees,” which would legally entitle the company’s drivers to basic labor provisions like minimum wage, overtime, and health care, Uber calls its drivers “contractors,” which leaves benefits uncomfortably out of reach. Like classic scam artists, Uber execs confuse their employees with a simple linguistic trick, renaming an old thing to a new one, and therefore resetting shared understandings of meaning (kind of like how I’m calling worker exploitation a “scam” right now!). By calling their drivers “contractors,” Uber obfuscates the labor arrangement by evoking entrepreneurship and independence for their workforce, when, in actuality, it’s the same employer-employee relationship as ever, but worse. Unlike traditional workplaces with a limited, interactive workforce, Uber isolates their drivers into faceless masses of app-based contract laborers, making collective advocacy impossible.
This is not an isolated problem. In fact, some 36 percent of America’s labor force is
already working freelance or part-time for multiple bosses, a statistic that “will increase dramatically” in the next two decades. As Rana Faroohar describes in her brilliant Don’t Be Evil: The Case Against Big Tech, the “gig economy” fosters an environment where what companies really want is a workforce on hand “24/7, without necessarily [being rewarded] like entrepreneurs, say with a piece of equity or a performance-based salary.” Because of this inherent and unjust rewriting of a modern labor contract, the growth of the unicorn economy will continue to draw desperate job-seekers into further positions of precarity, without minimum wage, health care, pension or, centrally, job security.
Not all unicorns employ workers on a gig economy model—WeWork didn’t—but whether gig workers or traditionally employed, start-up workers are highly precarious. In 2015,
Forbescalculated that nine in 10 start-ups will fail—a staggering statistic, given how many entrepreneurs are determined to make their new company the next Uber, Seamless, Postmates, or Squarespace. In an interview in Vanity Fair, the former Facebook staffer turned venture capitalist
Chamath Palihapitiya speaks candidly about the landscape of start-ups:
I think what we’ve had is a handful of investors who have extreme vision who make great investments in things that are amazing businesses: Facebook, Google, Uber. And then everybody else reacts to that success by trying to do the thing that most approximates the thing that’s working. As a result, most of these businesses are fundamentally not good, they’re poorly run, and they never should have been invested in in the first place.
In effect, as Palihapitiya says, we’re dealing with an economy of incessantly re-populating startups, which will inevitably employ workers in need of jobs. Under the provisions of the gig economy, many of these new start-up jobs will not offer traditional benefits or pay, and statistically, most of these companies will fail.
So yes, while the fundamental power differential remains as familiar as ever (the powerful exploit the powerless), we also see that, as Rana Foroohar
paraphrased Marshall McLuhan, “every new wave of technology contains all the previous waves within it.” As we continue to see new technological developments—and thus, new economies of growth and ensuing job creation—we need to examine and repair (or destroy) our existing unicorns before they inevitably are subsumed into something bigger.
4. It’s Not That Sad
In her article about WeWork, Lizzie Widdicombe describes the aesthetic of WeWork employees, depicting their “tight jeans and motorcycle jackets…which spoke of the excellent paychecks.” Even though they lost their jobs, the WeWork employees weren’t exactly “precarity laborers,” right?
Well, not really. An ongoing piece of the WeWork tumult has been the question of what will happen to the office cleaners, whose exact fate remains unclear. WeWork’s cleaning staff has long been marginalized by the organization: In 2015, 100 workers were laid off after trying to unionize, hoping to increase their wages from $10 an hour—a pittance for a company which at that time was worth $10 billion. In response to the outcry from the WeWork cleaning staff, Neumann argued that they weren’t even technically WeWork staff (they had been outsourced to WeWork via New York’s Commercial Building Maintenance Corporation), a defense which workers found less than satisfying. While reporters have spoken to various architects, designers, and engineers at WeWork, interviews with displaced cleaners have mostly not emerged.
Ultimately, an economy built on the inherently inflated promise of unicorn capitalism is a loss for all workers, be they in “tight jeans and motorcycle jackets” or fighting for more than $10 an hour. Still, it’s crucial—particularly as we strive to articulate more nuanced descriptions of workers in our contemporary economy, and to build mass solidarity—to remember to see all affected workers, not just the wealthy ones.
5. It’s Easy to Overlook
One of the more insidious dangers of the unicorn economy scam lies in the invisibility of its constitutive parts. While statistics abound about the thousands of WeWork employees laid off in the wake of Neumann’s malpractice, no specifics about their respective occupations, or about the fate of the cleaners in particular, can be found.
A similar opacity lies over companies like Uber. While stories of sexual assault by or against Uber drivers have circulated on social media for years, Uber only
recently released a devastating safety report which revealed that more than 3,000 sexual assaults were reported by riders and drivers alike during 2018. This is horrifying, but not surprising. It’s easy to look away from injustice when no one can see it happen in the first place.
It’s been said many times that we are now in an era comparable to the Industrial Revolution, when a rapid boom in new technology meant more work for everyone, but—crucially—no regulations. The unicorn economy is marked by its lawlessness. Bird scooters are dropped off in cities overnight, forcing governments to regulate around them. Uber drivers and riders find themselves at risk in a single car.
In this instance, the unicorn economy has moved fast and broken—or at least disrupted—employment, vacillating wildly between high and low stakes like a toggled knob. Technological advancement will not stop, nor will new forms of work (or old forms rebranded as new) bolstered by digital companies. Theoretically, this could be a great thing: Foroohar notes that “history has always shown that in the end technology is always a net job creator.” But perhaps “job creation” has never been the problem. We need, more than ever, robust workers’ advocacy and union support to stop the scamming of America’s working class, and to build a labor economy that can survive what the unicorn economy inevitably throws at it.
