[Donald]

You can thank loose monetary policy that has created an unbalance between capital seeking returns and the number of investment opportunities. Executives have leveraged this into abusive multi-class share structures that sacrifice shareholder's ability to reign in company behavior. The result is a few tech executives wielding unaccountable authority over incredibly powerful economic resources.

[JumpCrisscross]

> You can thank loose monetary policy

I'm not so sure. WeWork is the product of three capital sources.

One, Mortimer Zuckerman, who was "not just their landlords AND seed investor," but also "happened to own Fast Company and NY Post which were instrumental in propping up WeWork in the press before anybody knew who they were" [1].

Two, MBS, who backed the Vision Fund to the tune of $45 billion [2].

Three, Masa Son.

Mr. Zuckerman's investment was too small to be affected by monetary policy. And I doubt the Saudis invested in the Vision Fund because their bonds weren't yielding enough. The only monetary actor is Son, though that is more based on Japan than dollar dynamics.

WeWork's competition, on the other hand, is juiced by monetary policy in the form of construction loan and mortgage rates. But that doesn't create WeWork, just lots of commercial real estate.

[1] https://medium.com/@henry.hawksberry/is-we-work-a-fraud-5b78...

[2] https://www.reuters.com/article/us-saudi-pif-investment-fact...

[rhizome]

Aren't there also tax strategies/techniques that offer benefits from these investments when they fail as well? That both making and losing money in the VC/FinEng context each have their tax advantages (in the US)?

My impression is that upon this foundation and US interest rate/monetary policies create a perverse incentive where the investor doesn't really have to care too much how the company turns out. Like sure, a success pays off much more, but bankruptcy isn't bad either. Did I dream all this? :)

[JumpCrisscross]

> Aren't there also tax strategies/techniques that offer benefits from these investments when they fail as well?

The Vision Fund will have a $10bn capital loss to write off against future capital gains taxes. But those losses are worth a hell of a lot less than $10bn in cash.

WeWork has no federal guarantees and basically no assets. Its downside scenario is grim for shareholders. The only one walking away with cash might be Adam, though I expect he'll burn a good amount of it defending against litigious shareholders and possibly prosecutors.

[notyourday]

> Aren't there also tax strategies/techniques that offer benefits from these investments when they fail as well? That both making and losing money in the VC/FinEng context each have their tax advantages (in the US)?

Nope. It is always better to have income and pay taxes on it than to have losses and not pay taxes on the losses when we are dealing with entities over certain ( rather small ) size.

[evrydayhustling]

I think you are actually illustrating the point. Zuckerman's investment is too far upstream of WeWork's size to take the blame. And the fact that competing companies are able to rely on loans and mortgage easing is exactly why folks with a surplus of capital (Saud + Son) have to accept worse terms - they have more competition.

[noneeeed]

I think it was an episode of Planet Money a couple of months ago, that had an interview with someone senior in the bond world. She seemed really quite worried about the current state of the market.

There is so much capital desperately trying to find a home that they are having to invest in companies with very little oversight or influence. In the past they would have been the grown-ups in the room, applying some scrutiny and skepticism to everything. But now companies can simply go somewhere else if you turn them down.

She seemed to think that there were a lot of companies being kept afloat by this easy money that could easily go pop in the near future, or companies that should have gone bust ages ago but are limping along with cheap credit.

It does seem that whether or not we are headed for an imminant bust, the economy is in a pretty peculiar place at the moment with negative interest rates etc.

[andrekandre]

do you have a link to that? (can’t seem to find it myself)

i would really like to listen to it because intuitively i’ve felt the same way and wonder what others who are-in-the-know have to say about that.

[nalfien]

"Abusive"? That's a bit over the top. No one is forcing these people to put money into these companies if they dont like the terms.

[asdkhadsj]

I mean, it sounds like it is abusive, but it's an abusive relationship investors sought out.

At this point it's akin to someone who seeks out abusive partners due to mental health issues. It doesn't make the partners any less abusive, but lets not kid ourselves and think the seeker is a healthy individual.

Their greed is killing them.

[ehsankia]

I think the reality of the situation is that some of these investors actually like the "visionary leader who full control and isn't dragged down by investors" model.

[pgwhalen]

Yeah I don’t understand why people in this thread aren’t entertaining that possibility. It objectively worked for Facebook, at least in terms of financial return.

[grandridge]

If they actually had to earn the money they'd treat it different. Free money just enables stupid shit like this at all our expenses. The comment you responded to is on point

[nicoburns]

The problem is having so much wealth concentrated in the first place. If capital was more evenly spread, then those who control it would have no problems finding worthwhile investments (smaller investments would become worthwhile because collectively the controllers of the capital would have more time to oversee them)

[H8crilA]

The real question is what is the endgame for our current worldwide incredibly loose monetary policy and deep wealth inequality. Literally nothing good comes to my mind, at best we'll get a slow return to a few % interest rates on major 10yr notes, which means a decade of garbage returns on pretty much any asset class, problems with pension funds, general malaise. At worst, well, last time we had this setup was 1930s and the various world govt stimulus went towards war efforts ...