As the saying goes, “The higher they climb, the harder they fall” – Adam Neumann’s fall was indeed spectacular accompanied by the startup, Adam Neumann, WeWork, business model, WeWork scandal.
Adam Neumann has been, for a few years now, a well-known figure in the business world. He was once the CEO of a multi-billion dollar company - WeWork. But lately, many people wonder what he’s been up to since he left the company in 2019 after ramping up controversies and creating the WeWork scandal. So let’s picture the background and key moments of this unusual entrepreneur that got everyone to trust his vision and business model.
He was born in Tel Aviv, Israel, in 1979 as the firstborn of a family of medics. After his parent got divorced, he moved a lot, with Adam himself stating that in his first 22 years of life, he switched homes 13 times. Moving out so often might have shaped his inclination for the real estate industry as an entrepreneur later in his life, but we can’t be sure.
So, as a 17-year-old teenager, Neumann started serving in the Israeli Defense Forces (IDF), and he got quite fond of it. But quickly after he ended his 5 years period there, he moved to New York to live with his sister and pursue his business inclinations.
And that’s when everything started!
Once there, he enrolled in the Zicklin School of Business at Baruch College in New York City and didn’t wait to graduate in order to start a business. Neumann’s first endeavor was in the women’s fashion business, and later in baby clothing, where he worked on offering baby clothes with soft pads in key areas via his company back then, Egg Baby. While the second idea worked better for him and even made him drop out of college for better focusing his time on the business, it was not going to last.
So by 2008, Adam Neumann and Miguel McKelvey, a friend of his, started GreenDesk, which was a shared workspace business. Adam said in an interview that this idea came into his mind as early as his college years, but he let it pass due to his teacher at the time not believing he could ever manage to raise so much money to really scale the business. But he did. And big time!
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The founders collaborated with their landlord, and in less than 2 years GreenDesk was operating more than 100 offices. But Neumann and McKelvey had other plans for their business model. They wanted to start something new.
By 2009, Neumann had married his present wife, Rebekah, and later on, in 2010, he and his friend sold their stake in GreenDesk. So they can start WeWork on their own. How was it different from GreenDesk?
Well, the purpose was not only to lease offices and create shared workspaces but also to offer people services that would promote the idea of community and better work-life balance. Adam Newmann believed in their business model that people didn’t just want to work in an office. They wanted to belong to a community, a larger movement that would help everyone grow. This was the foundation of Neumann’s vision for WeWork, and this is how he envisioned the future of work.
And he was right! WeWork quickly gained popularity among freelancers, small startups, and even established businesses looking for flexible workspaces. People love the idea of working with other like-minded individuals.
So the downfall of Adam Neumann was not due to the shortcomings of WeWork. It was his behavior, his management style, and the decisions made by himself.
As a CEO in the last decade, Adam Neumann was known for both his talented entrepreneurial and storytelling skills and his unconventional character. He and his wife, Rebekah Neumann, were both very spiritual persons, enjoyers of the vegetarian lifestyle, and believers in the power of meditation and mindfulness. Of course, people were drawn to these charismatic figures.
But it turned out they were not the best people to lead a multibillion-dollar company. Even though Adam was able to get investments for WeWork very fast, and the company was expanding like crazy, the Neumann family continued to make questionable decisions. For example, the couple was supposedly firing people based on “bad vibes” and even banned the consumption of meat at the company’s meetings.
Even so, WeWork was operating in more than 40 countries at its peak and was valued at almost $50 billion at the beginning of 2019. However, Neuman’s very expensive lifestyle and business model were becoming a problem alongside his friction with what was ethical to do as CEO. The company was spending a lot of money on events, free beer, and rapid expansion across the globe. And while that would eventually signal to them that costs had to be reduced, they started laying off people.
But in contrast, at the same time, Adam Neumann bought a $60 million private jet for himself that he used to fly everywhere he wanted “in the name of the company”. Talking about great leaders… Not to mention that he was caught in a weed possession scandal where he was reportedly smoking weed on the plane during a flight to Israel with his friends. And this is not all!
He was not only starting to look bad in the eyes of the public and its private investors because of his party-boy figure that was fond of drugs, alcohol, and parties. But it was even more problematic when he started purchasing assets and selling them to his own company.
Take his decision to buy buildings and then lease them back to WeWork. But at a much higher rate! Wall Street Journal stated that according to property records, corporate records, and sources familiar with the deals, various entities associated with Adam Neumann have secretly obtained controlling interests in over 4000 apartments in Miami, Nashville, Atlanta, and Fort Lauderdale. All of these properties have an estimated value of over $1 billion. With this controversial move, he was enriching himself based on the company he co-founded.
And that’s not all! Before the 2019 rebranding of WeWork into The We Company, he bought the copyrights for the “We” word and sold them back to his company for almost $6 million. However, due to a very negative response from investors regarding this action, Neumann had to pay the money back.
If that was not enough, people also complained about Neumann having too much decisional power inside the company and even attributing his wife the power to elect another CEO if he was to die in the future.
To top everything off, when the S-1 file for the IPO came in August 2019 for The We Company to go public, not only did the file raise some eyebrows due to the unprofitability characteristics of the company. But Adam Neumann had also decided to sell a huge chunk of his shares, amounting to $700 million causing the first steps for the WeWork scandal. What kind of CEO does that when his company is about to go public?
As you can see, the board of directors’ decision to have Neumann step down from the helm of the company in the autumn of 2019 was more than justifiable. But even though at his peak, his net worth was up to $4 billion, Adam is nowhere near broke today. He is still a billionaire, and lately, he started a new company – one that focuses on offering residential real estate solutions to people. The company is called Flow and has been estimated to be more than $1bln very quickly.
It does seem like Adam Neumann had and still has big aspirations. He even stated in 2019 that his personal goal is to become the first trillionaire in the world and maybe even expand WeWork to Mars while also becoming the prime minister of Israel and the “president of the world”. This is very optimistic, in our opinion – a bit too optimistic, actually.
But some people argue that Adam Neumann’s behavior is reflective of the Silicon Valley “bro culture” that has been prevalent in the tech industry. The culture is characterized by an emphasis on a work-hard, play-hard mentality that encourages risk-taking, boldness, individualism, and especially drug use. And all of these can sometimes, unfortunately, lead to a lack of concern for ethics and social responsibility.
However, others argue that Neumann’s behavior is not just a reflection of a broader cultural issue. Instead, it is a result of his own personal flaws, as he lacked the self-control to manage the incredible power and wealth he had accumulated.
Whatever the root cause of Neumann’s behavior, his rise and fall serve as a cautionary tale for entrepreneurs and business leaders everywhere. While ambition and risk-taking are key ingredients for success, they must be balanced with a sense of ethics and accountability. Without these values, even the most successful company can quickly crumble, taking its leaders down with it.
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