Writer's desk

A modern guide to pen, paper and writing

Why WeWork’s IPO will be a failure — August 19, 2019

Why WeWork’s IPO will be a failure

WeWork’s recently released IPO prospectus should have sent investors running. The office and hot desk rental company, after SoftBank pulled out of a $16bn investment, is looking to raise up to $3bn from the public market. It won’t be getting a dollar from me.
Photo by Shridhar Gupta on Unsplash

WeWork’s business model is simple. It leases property from landlords, does them up, and sells spaces to self-employed workers, start-ups and larger enterprises. It typically leases a location for 15 years and sells desk space on a monthly basis. It thinks that it should be worth $47bn.

It is, instead, likely to join the other big unicorns who launched their IPOs this year in stumbling to a much lower valuation. Think of Uber and Lyft.

Why won’t WeWorks model work?

They take on long-term obligations and only require short commitments from their members. They have $47bn in lease obligations, and that figure will only grow as they open more locations. They pump loads of money into their sites, making them fit for a hip, millennial freelancer or start-up. That’s where a lot of their losses come from, but that high up-front cost must be recouped over more than a decade. It would be risky in a stable, growing economy. Right now, we’re headed into the first recession for over a decade.

Will the coming recession hit WeWork hard?

The UK and Germany both announced that their economies were shrinking last week. The stock market took a considerable hit from the news. All around the globe, people are expecting a recession sooner rather than later. Trade wars, Brexit, and a mature business cycle all contribute to that feeling. Yield curves have inverted. Such an inversion has preceded every recession for the past fifty years. Only once have yields inverted without a recession happening.

The S&P 500 peaks within 3 to 22 months of a yield curve inversion. We could have two years before a downturn hits, but it may happen a lot quicker than that.

What is a yield curve inversion?

Government’s sell bonds to finance their running costs. These are very secure, not many countries default on their debt. But things are always more secure in the short term when we know more of the risks an economy might run into. This means that usually long-term bonds give better returns than short term ones as there is more risk involved. When a yield curve inverts, markets believe that short term risks are greater than the long-term ones and want to protect their money. In other words, bad times are coming sooner rather than later.

Recessions are bad for all parts of the economy, so why should you be more concerned about the effect one will have on WeWork in particular?

WeWork’s customers are mostly small teams, freelancers and the self-employed. Renting a hot desk in a WeWork location in London costs around £600 per month. When a recession hits, it hits those small businesses and freelancers hardest. An easy cost to cut is that hot desk. Someone is £600 richer and can just work from the kitchen table. Not as lovely as the kombucha, microbrew offerings of a WeWork, but you’ve got to save money. And it is a natural expense to get rid of. These memberships are done on a monthly rolling basis.

Photo by Dan Gold on Unsplash

WeWork recognises this problem and has been trying to attract more enterprise customers. In their IPO prospectus, however, they have redefined what enterprise customers are, from businesses with 1,000 employees down to those with 500. Even then, they only make up 29% of WeWork’s business.

When the next recession hits, there will be a lot of space in WeWork locations.

Is WeWork overvalued?

The company’s sky-high valuation, around twenty-six times revenue, is based on its reputation. It brands itself as a tech company, in the same field as Facebook, Google or Amazon. ‘Technology’ is mentioned 93 times in their prospectus. But it isn’t a tech company. It rents office space. It might rent the most beautiful office space on the market, but it is still renting office space.

The brand of WeWork is doing a lot of heavy lifting. It calls customers ‘members’, its mission is to ‘elevate the world’s consciousness’, and it opens its IPO prospectus with the lofty declaration that ‘[w]e dedicate this to the energy of we — greater than any one of us but inside each of us’. That is a whole lot of bullshit. It rents office space.

IWG, which rents office space out, has revenues of over $3.25bn, much more than WeWork’s. Yet it is only valued less than $5bn. It doesn’t have the explosive growth of WeWork, but that growth is risky in risky economic circumstances.

Are there any signs of optimism?

In 2018 WeWork brought in $1.54bn. That’s nearly double the $764m it did in 2017. That’s stupendous growth and would auger well for a lot of companies. The losses, though, are on a similar trajectory. In 2017 it lost $900m, in 2018 that was $1.9bn. It costs WeWork $2 to make $1.

That could change in the future. High up-front costs recouped over decades unless a recession hits, can be sustainable. But even WeWork doesn’t think this is likely:

“We have a history of losses and, especially if we continue to grow at an accelerated rate, we may be unable to achieve profitability at a company level… for the foreseeable future.”

Adam Neuman, CEO and founder of WeWork, doesn’t even believe in the company. He has sold $700m of his stock already, and the prospectus even says ‘there can be no assurance that Adam will continue to work for us or serve our interests in any capacity’.

WeWork is a lousy bet. Its fundamentals are lacking, it’s facing a tight market, and it will be found out. Can a successful business be built of its model? Yes, but IWG has already done it. It’s not sexy or hip. But it works. The problem is that it has a value less than a tenth of WeWork’s.

When WeWork IPOs, it will be the early investors and backers who make money. The rest of us will soon be held WeWork shares that are plunging in value. Its backers have pumped the company up; now they’re ready to dump the stock before it falls.

Originally published on Medium

Smart Thinking is anything but — May 31, 2019

Smart Thinking is anything but

Bookshops are taking the joy out of buying books

A new section misses the magic of exploring a bookshop

There is something magical about walking to a bookshop with no idea what you will walk out with. This whole vista of knowledge is open to you. The sum of learning. Coming across something you had no idea you wanted to learn about and then holding and having the keys to a new kingdom in your hands. More magical still is coming across a completely new field, new topic, new section.

In a Waterstones recently I became aware of a new section. Not history, not science, not linguistics, not anything like that. I could instead become a neophyte of ‘Smart Thinking’. This ‘new’ genre of popular non-fiction was populated by books with titles that read like your university friend’s drunken idea for a really great book. All constructed in the same way. Pithy title; explanatory and long-winded subtitle. The Path: A New Way to Think About Everything, Quiet: The Power of Introverts in a World That Can’t Stop Talking or The Organized Mind: Thinking Straight in the Age of Information Overload.

They draw you in.

The label ‘Smart Thinking’ turns me off. It takes this wondrous experience of being able to forge your own path through the garden of human learning and thought into something which is just there to be consumed. Not enjoyed or personally cherished. Instead, it makes the individual and private act of passionate learning into a performative act. Here are the books you need to read to be an interesting dinner party guest. The world is broken down into its tiny, irreducible parts and interpreted in a way that means that only economics (Freakonomics: A Rogue Economist Explores the Hidden Side of Everything), or anything else, can truly explain the world. It puts forth no argument, it tolerates no compromise. It reduces these books, all great individually I know, into an exercise in branding. I loathe it because it works so well on me.

Photo by Karim Ghantous on Unsplash

The individual quality of these books is ignored. It simplifies our messy world into a neat and easy collection. It is the TED talk ethos repurposed for marketing. ‘Smart Thinking’ is positioning. It positions certain books so obviously as being the only section you need bother to spend your time exploring. It robs you, me at least, of that magical feeling of exploration. It reduces your scope for serendipitous discovery. Fiction isn’t broken down into the ‘Happy Endings’ or the ‘Worthwhile Literature’ section. Yes, you do have tables with recent prize winners or shortlistees laid out. But is this the same as attaching a big sticker to the books saying ‘This is the one you need to read’ or that this is the book you need to post about on Instagram. Sip a trendy coffee in a sun-drenched, filtered café and watch as the likes and comments flood in.

Buy me for no other reason but to be seen to buy me.

Our lives were always a conversation between our private selves and our public personas. Neither was the genuine article. There was a handsome balance between the two. As we construct and constantly reinterpret our identities, private reflection always gave us a chance to monitor and evaluate how we presented ourselves. But the private and the public have nearly and neatly collapsed into one another. Smart Thinking drives us toward a purpose beyond just enjoying the nerdy aspects of our private selves. It forces us to justify those aspects to a wider audience. We lose the ability to discover for ourselves. Our purchases and passions are instead for an audience.

Smart Thinking is not a genre. It’s not a topic. It is not a guide toward discovery but a simple signpost beckoning you to the already accepted — a clarion imploring to join the zeitgeist. The books in the Smart Thinking section have their place. But Smart Thinking is not that place. I have read, enjoyed and found great value in many of them. They don’t belong together. They belong in the hinterlands. Under the History, the Science, the Politics banners. They are only positioned together as a short cut to an acceptable, Instagramable moment where you prove your credentials for a crowd that really doesn’t care. It takes the private joy of reading and turns into a public performance. One that needs as its justification the acceptance of the audience.

Photo by Ben White on Unsplash

The joy of learning is discovering the unexpected. It is the sudden flash of understanding. The first spark starts with the realisation something is missing from your understanding of the world. It grips you suddenly as a learning lust. A title, a spine, a hint of a world beyond your current understanding all spark it. To walk into a place where that can all happen but then be confronted with the ‘Smart Thinking’ books section softens that feeling. Smart Thinking strikes me as a way out of indulging your foibles and fancies. It reduces the spontaneous urge to a corporately compiled list of titles emailed out every first Thursday of the month.

I still buy books from the Smart Thinking section. I tell myself that it is not because of the marketing bullshit, but what do I know? I don’t like Smart Thinking. I don’t like it because it works so well on me.

Welcome to Writer’s Desk — November 30, 2018

Welcome to Writer’s Desk

I’m glad you’re here. 

Writer’s Desk is here for everything you could ever want to know about the world of writing and editing, and using the most beautiful stationery.

From the realm of paper and the best cheap fountain pens (and I’ve got a few of those) to the most insightful writing and style guides you will get a jump start on things I’ve had to spend years gathering myself. 

We’ll go beyond Strunk and White and a half chewed Bic. 

And it’s not just longhand stuff here. I do actually use a computer for a lot of writing and editing. The best word processors, the most useful desktop publishing programs and where to publish your work will get their time in the lime light.

So, ink your pen, smooth down the page – we’ve got a lot to get through.