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Adam Neumann's $16 Billion Neo-Utopian Play To Turn WeWork Into WeWorld

Can the hipster mecca for getting $#%! done live up to its staggering valuation, shush haters, & bend society to the WeWork worldview?

Adam Neumann's $16 Billion Neo-Utopian Play To Turn WeWork Into WeWorld

Just kids: Adam Neumann credits his wife and cofounder, Rebekah Paltrow Neumann, with bringing a deeper soulfulness to WeWork.

[Photos: Steven Klein; Styling: Christian Stroble; Hair: Tomo Jidai at Streeters London; Makeup: Regine Thorre; Production: LOLA Production NYC]

A Beatles chorus bounces off the bare concrete walls of what was once J.P. Morgan’s headquarters. "Come together, right now." The nearly 1,000 chattering WeWork employees who fill the event space look toward the stage, expecting CEO Adam Neumann to appear from the wings any second now. Instead, he sprints down the center aisle, and giddy conversations evolve into a cheer. When John Lennon trills "Over me," Neumann leaps onto the stage, sticking the landing.

"Wow," he begins, in his slight Israeli accent, as he turns to survey the crowd, which has traveled to New York from all over the world for WeWork’s second annual employee summit this past January. "There were only 250 people the first time. If you’re one of those 250 people who were here January of 2015, make some noise!"

Screaming and applause.

"Now, if you weren’t, raise your hands and make some noise!"

Another wave of enthusiasm fills the cavernous old bank.

"That’s the first lesson of teamwork," Neumann concludes. "Two-fifty can easily make more noise than 900."

Neumann, who’s wearing a gray T-shirt that exclaims NEVER SETTLE, paces the stage, rhythmically waving his arm as he urges the group to reach for its full noisemaking potential. "I just want to share with you guys what is happening around you," he says. The 36-year-old Neumann, with his shoulder-length dark hair, six-foot-five frame, and proclivity for black leather jackets, resembles a rock star. But the atmosphere here, especially at 10 in the morning on a Friday, is more tent revival than rollicking concert. Employees participate with the fervent obedience of true believers; there’s nary an eye roll in sight.

"We have kids here from Seattle!" he shouts, and a roar erupts from a corner of the large room. Bursts of "Woo!" follow for "Brooklyn! San Francisco! Berkeley! We need more energy, Berkeley! Los Angeles! Denver! Chicago! Boston! Philadelphia! Atlanta!"

Only one person pipes up for Atlanta, where WeWork will open in April, and Neumann pauses to allow the crowd to finish laughing at the contrast.

"D.C.! Miami! London! Now, Amsterdam! Tel Aviv! Beersheba!"

Neumann interrupts himself to share a quick story. "When my designers came to me and said we’re going to open a location in Beersheba, I said, ‘Really, Beersheeba?’ They said, ‘Yes, it’s a college town.’ And I said, ‘I was born there. It used to be a dump.’ " The crowd chuckles. "They said, ‘No, it’s been a long time since you’ve been there; it’s a college town.’ So, Be’er Sheva!" Neumann shouts, using the Hebrew pronunciation.

"Sarona!—That’s more like Tel Aviv—Tel Aviv, again! Shanghai! Mexico City! Toronto! Montreal!"

Neumann has saved what he knows will be the best for last, and he pauses for dramatic effect before spitting out, "New York!"

The majority of the room goes crazy.

"That is a city that has achieved scale," Neumann says, to more laughter. WeWork has 26 offices in New York. "All cities are going to sound like that in the next two to three years."

Neumann and his cofounder, Miguel McKelvey, founded WeWork in 2010 with a simple business model: The company rents office space from landlords wholesale, breaks it into smaller units, and subleases it at a profit. WeWork, which now has 77 locations and more than 50,000 members, says its ultimate potential is much bigger—and investors agree. In February 2014, WeWork’s backers valued the company at $1.5 billion; by last week, its valuation had jumped to $16 billion, making WeWork, on paper, the world’s 6th most valuable private startup.

Every modern generation has sought to remake the workplace, from the introduction of the cubicle in the 1960s to the 1990s’ foosball tables and flexible hours. Now members of the generation that would rather make a job than take a job are embracing coworking environments where they can operate independently while still drawing support and networking opportunities from peers. Neumann calls these people the We Generation, which, he says, "cares about the world, actually wants to do cool things, and loves working."

Critics look at WeWork’s business model of trading spaces and shrug, That’s it? Its high valuation has made it a staple of lists predicting which unicorn startups will fail. "Their multiples are more like a tech company than what a real estate company would get," says Charles Clinton, who runs a real-estate-funding platform called EquityMultiple. "There’s a feeling that that doesn’t really make sense." If the economy wobbles, skeptics contend, WeWork’s customers will scurry back to cafés with free Wi-Fi.

Neumann, who was envisioning WeWork with 100 buildings when he had only two, sees his company as an operating system that brings real estate to life in the same way that Android is an operating system that makes a smartphone more than mere glass and metal. As more spaces open and members join the network, WeWork will have increasing power to offer such services as shipping, software, credit cards, travel, payroll, banking, and training. Eventually, members might join for these benefits alone, without any physical access whatsoever. Neumann also envisions WeWork managing offices on behalf of corporations (which are cutting down on square footage per employee). WeWork will connect them all through an app-based network. "Real estate," according to Neumann, "is just a tool."

He isn’t content simply to remake the modern office; he also wants to change how millennials think about home. WeLive, his new "co-living" residences, is a bet that they’ll value access over ownership. Just like they’re choosing Uber or Lyft rather than buying a car or subscribing to Spotify rather than having a record collection, they will be happy to share their living space, too. The first WeLive, which features common amenities with modest personal spaces, opened in New York City in January. According to leaked financial documents, the company plans to open 68 more in the next two years, the first step toward WeWork creating entire neighborhoods. "It’s a when, not an if," Neumann says of  WeCities.

Of course, in order to follow through on any of these plans, WeWork needs to convince young, urban professionals to buy into its philosophy of living and working together. Which is why, in addition to square footage, WeWork runs on something that doesn’t easily fit on a term sheet. You can call it a mission, a vibe, or culture. Neumann calls it "energy." If anyone can create energy, it’s him. But is it enough to power WeWorld?

"This company is 100% going to succeed," Neumann says. "The question is, in 10 years, when we look back, how much?"

When Neumann moved into his sister Adi’s New York apartment in 2001, fresh off his service in the Israeli military, what surprised him most was the silence of elevator rides. "Why is nobody talking to each other?" he remembers asking her. "We’re in the same building. How come you don’t know everybody?" In Israel, neighbors have almost the opposite relationship. "If I’m in a neighborhood and I need some salt," he says, "I don’t even need to know the person. I knock on the door and I ask for some salt."

Neumann decided to turn making friends in the building into a competition. "Let’s see which one of us can meet more people on every floor," he told Adi, "so after a month, we can go to that person, knock on their door, and see if we can hang out and have a cup of coffee."

Though he lost the friend-making game, it wasn’t because he was particularly unsuccessful. "She was a supermodel," he notes with a smirk. By the end of the month, between the two of them, they had a friend on every floor. "The entire energy of the building changed," Neumann says.

Neumann had come to New York because he wanted to get rich, and everywhere he turned he saw business ideas. (His first venture, which failed, was making ladies’ shoes with collapsible heels, inspired by watching his sister walk to modeling auditions in flats and then change into heels.) The friend-making game was no exception. It inspired him to enter an idea for community-structured real estate, which he called "concept living," into a business plan competition at Baruch College. His was one of the few proposals that did not advance to the second round. "I didn’t even get a chance to present it verbally," Neumann remembers complaining to the dean. "And [the dean] said, ‘There’s no 23-year-old, or any inexperienced real estate person, who will ever be able to raise enough money to do anything like ‘concept living.’ "

Still, the real estate bug stayed with him. After launching yet another curious startup for a single guy in his late twenties (baby clothes), Neumann fell in love with a former warehouse in his Brooklyn neighborhood, the loft-friendly, rapidly gentrifying Dumbo. He found the landlord, Joshua Guttman, and said, "Give me the building," Neumann recalls. "And he would be like, ‘You’re in baby clothes. What do you know about real estate?’ " Neumann shot right back: "Your building is empty. What do you know about real estate?" Eventually, Guttman, Neumann, and McKelvey cofounded GreenDesk, an environmentally themed coworking space.

Their timing couldn’t have been worse, or so it seemed: It was the spring of 2008, and the economy was starting to buckle. Guttman lamented, as Neumann puts it, that "a real estate downturn makes everything not work." The seeds of WeWork sprouted in Neumann’s reply: "This is not real estate," he said, "and it’s actually gonna work better. People are gonna wanna be next to other people; some people are gonna get laid off; they’re gonna start new businesses; some companies are gonna wanna downsize." He was right. GreenDesk filled up, and Neumann now had grander aspirations.

Neumann’s trajectory from serial schlepper to startup success happened after he met his future wife, Rebekah Paltrow. He admits that he was a bit of a mess as a 28-year-old, a struggling entrepreneur selling baby jeans with protective kneepads. "He was really, really thin, and he was shaking ’cause I think he was smoking too many cigarettes," Rebekah says, sitting in Adam’s chair in his office at WeWork’s Chelsea headquarters. Adam, hair dripping wet from a shower after working the heavy bag near his desk, sits next to her and sips green juice from a straw. "And he walked in, and I saw that he was my soul mate. It’s the truth."

She did have some concerns. "You know you’re a big talker," she told him, "but you can’t even afford lunch." Like many couples, the Neumanns have their early courtship down to a routine, and Adam picks up the story on cue. "I said, ‘Well, I’m an entrepreneur, and money is tight right now; it’s all in inventory.’ She said to me, ‘Well, maybe you’re in the wrong business, because if you were doing the right thing, you would be able to afford dinner.’ " Suddenly, the lights click off (they’re on an automatic timer to save electricity), and the Neumanns pause as we wave our arms to signal we’re still in the room.

Adam continues where he left off. "[She said,] ‘I’m not so sure that you should be walking around, dragging these two suitcases full of baby clothes—’ "

Rebekah jumps in, "—that were falling out onto the sidewalk and also that didn’t actually fit babies. The limbs were like . . . " She turns in her chair, her slender frame now facing Adam, forcing him to acknowledge sheepishly, "We had sizing issues."

Rebekah had done a lot before meeting Adam. She had traded stocks at Salomon Smith Barney. A student of Buddhism, she had stayed with the monks in Dharamsala and been to the Dalai Lama’s birthday party. She was fluent in three languages. She’d studied Jivamukti Yoga and toured with the hip-hop fusion combo Michael Franti & Spearhead.

As she helped Adam quit smoking and soda—the two ritually dumped the artifacts of his bad habits down the garbage chute of Rebekah’s East Village apartment—she also introduced him to kabbalah and tempered his obsession with lucre. "Rebekah said, ‘Stop. No more talking about money,’ " Adam remembers. "We’re going to talk about wellness, happiness, fulfillment, and if the money is supposed to follow, it will. And if it doesn’t, it doesn’t matter, because we will be happy and fulfilled." This would become the foundation of WeWork’s mission.

Neumann came to WeWork with a sharp business mind, a Navy-influenced leadership style, and ceaseless hustle. But Rebekah (and McKelvey) helped teach him about what WeWork executives often refer to as the "soul" side of the business. "My soul was attracted to ‘we,’ " Adam says, "but it required some effort."

Rebekah pitched in at GreenDesk, where she helped McKelvey run tours and assist members, while Adam got out of the baby clothes business. At WeWork, she is a founding partner and chief brand officer. "We don’t have a line at all between work and life," she says. "It’s not even a blurred line. There is no line."

Soul proprietor: WeWork cofounder Rebekah Paltrow Neumann makes sure the company stays true to its mission.

Neumann now had a purpose (and a muse) to go with his entrepreneurial drive, and for the first time in his career, he started to see results. In 2010, Neumann and McKelvey sold their stake in GreenDesk and launched WeWork, which they envisioned as a global network of work spaces based on a brand that extended further than "green." The only problem? They had no building. And only $300,000 to their names. Worse, most landlords at the time feared coworking, with its constant foot traffic and unknown tenants, the same way many also fear Airbnb. "We didn’t have credibility or credit," McKelvey says. "We had no business taking out a 40,000-square-foot lease." Neumann adds, "[The landlord] needed more, and I didn’t have more. All I had was my words." Neumann convinced the landlord to rent WeWork one floor on a trial basis.

Even more than words, Neumann, who is dyslexic, possesses chutzpah. He quickly learned the real estate business—Rebekah tells me his expertise "is like something from another life"—and he wasn’t intimidated by the powerful people with whom he wanted to do business. When he met Chicago Mayor Rahm Emanuel, someone most people know not to antagonize, Neumann inadvertently, and then intentionally, insulted the mayor’s coworking project, and the two ended up cursing each other in Hebrew. Quickly, though, they partnered on a bike-parking station in one of WeWork’s Chicago locations. As one former employee tells me when I ask about Neumann, "I hate him, but I still can’t help but love him."

Neumann used the initial New York WeWork as a showpiece to entice other landlords and investors. "We toured their Grand Street location and absolutely loved the look and vibe," says David Zar, who granted WeWork its second lease. To woo Benchmark Capital as an investor, Neumann insisted Bruce Dunlevie, one of the general partners, come to New York to see WeWork for himself. "We all said, ‘Nah, that doesn’t sound very interesting,’ " Dunlevie recalls, "because it’s just a real estate business, and we don’t know anything about real estate." After he visited, though, Dunlevie changed his assessment: "The unit economics at WeWork were already interesting, and there were reasons to think that they could get better."

By 2014, WeWork had 200 employees, 1.5 million square feet of space, and 10,000 members. Its business model—with gross margins of approximately 60%—made even the most hardened, stodgy real estate developers doubly bubbly. At a party in May of that year, celebrating the expansion of WeWork’s headquarters, Steven Roth, the septuagenarian chairman and founder of Vornado Realty Trust, toasted Neumann under a net full of white and black balloons. "Adam always says, ‘No schmucks and no assholes,’ " Roth began. "But the definition of a schmuck is someone who rents a property at .5x and then that guy turns around and rents it at 1.5x."

Neumann, laughing, corrected Roth by holding up two fingers, to make clear that he was charging two times the going rate, even more than Roth thought.

"Then, the definition of an asshole," Roth continued. "Now, Adam is a nice guy, but every time I see him, he always says, ‘You asshole. You could have invested at [a] $200 million [valuation]. Now it’s $400 million.’ " At the end of his speech, instead of lifting a glass, Roth took his turn ringing a gong—more than five feet in diameter—that Neumann had imprinted with the WeWork logo. (Neumann and company used to ring a smaller gong to commemorate every deal but stopped when "there were too many," he says.) Two more of New York City’s biggest landlords—Bill Rudin, whose family owns 15 million square feet of New York City real estate, and Boston Properties CEO Owen D. Thomas—also took turns with the gong. In one of the last industries in which people still go to work in three-piece suits, Neumann, an entrepreneur with no money, who talked constantly of community and dressed like a teenager, had inspired the biggest players in real estate to buy into his vision. "Ideas are a dime a dozen," says Jared Kushner of Kushner Properties, whose massive Dumbo office development includes a WeWork. "But it’s really the jockey that makes them work."

Even Neumann can’t isolate what, precisely, it is about WeWork that is so amazing. "It can’t exactly be touched," he says. "It’s a feeling.

"It has to be the beer," a coworker tells me, believing that the secret to WeWork’s success is the always-on-tap brew in its kitchens. But the "hip," "fun," "millennial" things people most often cite when they try to describe WeWork are almost irrelevant, as I discover while working from two New York locations this winter. The room full of old arcade games at the 222 Broadway location is empty all day, and the controllers for a nearby Nintendo 64 sit in a neat line, wrapped tightly by their cords in a way that suggests they’ve been undisturbed for some time. At the end of the day, I see only three people pull the famous WeWork tap. Mostly people inside of WeWork are just . . . working.

Beyond the showy perks, there are hundreds of small design elements that help create that feeling. If anyone can articulate the secrets of this magic trick, it’s Neumann’s chief creative officer McKelvey, an architect and designer. When WeWork moved into its current headquarters (its 10th in six years), McKelvey was troubled by one particular open area. Instead of hanging out in the common space, members marched through it to their offices. So he spent eight hours just watching people interact in the space—and concluded that there wasn’t enough furniture to invite hanging out. The open space was too open. Late one night, he moved in more tables and chairs. "Literally, overnight change," he says. The couches were full. People were using the standing table and sitting in the seats that McKelvey had set up. "That was a really amazing validation," he says.

"This might not seem like this makes a big difference," he says as he gestures toward another detail, a large pane of glass that separates the room we’re meeting in from the hallway, "but it does. The wall system that we use—it has a loose feeling. It’s not perfect. It’s a difference of being dressed in a button-down shirt with your shirt tucked in or wearing a hoodie. That’s how you make vibe."

People at WeWork feel comfortable taking their shoes off. They sit on windowsills, and they don’t even ask if you mind before plopping their MacBooks down next to yours at a café table. Startup teams sit in their tiny glass offices, whose transparency serves the dual purpose of preventing claustrophobia and reminding you that in this vast floor plan, even when huddled in your own personal hobbit hole, you are never, ever alone.

Some members moan about long lines for the elevator (apparently not understanding that it’s an opportunity to play a friend-making game), a loud work environment, and being crammed into a tiny office, even if its walls do happen to be made out of glass. Others have more specific complaints. "First, 98% of the companies have moronic names," explains a friend when I bring up her company’s WeWork space. "Second, no, I can’t go have wings and beer on the fifth floor at 3:45. Third, it is a pain in the ass to print things. Fourth, I have to bring my ID sensor everywhere, even the bathroom. It’s like the damn White House."

Even with these criticisms, the WeWork effect is more gym than coffee shop: It’s less about table space and Wi-Fi than about wanting to be in an environment where other people are also working hard. "They bring great energy," Neumann says of WeWork members. "They turn the space on."

By packing people closer together, WeWork also makes much more money per square foot than it would with traditional offices. In Times Square, for instance, one of the most expensive neighborhoods in the country, the company pays $58 per square foot; on average it’s able to rent space to its members for around $160 per square foot. The appeal for members: Their cost per office is cheaper (each member gets about 50 square feet), plus access to common spaces.

Artie Minson, WeWork’s COO, keeps a running tally of new members on a large-screen monitor in his office. When we met in early February, the "this week" column was up to 838, which means that WeWork added something like $7 million of revenue to its run rate on office space alone. These numbers don’t include any business services WeWork might sell those members—and it was only Thursday.

WeWork raised $434 million in June 2015, giving it that $10 billion valuation—and a target on its back. First, the union that represents cleaners in New York protested outside WeWork locations, labeling Neumann and McKelvey greedy because most of their contracted nonunion workers made just $10 an hour.

Neumann tried to talk his way out—he approached the picketing cleaners, with a New York Times reporter in tow, and talked to them about his immigrant background and what they had in common—but he only ended up making things worse. "The last thing I was going to do was work with the union," Neumann tells me, "because I didn’t believe that it’s fair to blackmail someone to do something."

Then Neumann sat down with Héctor Figueroa, president of the 32BJ Service Employees International Union. "Rather than talking about the issue itself," Figueroa says, "he wanted to have a conversation about who we are as people." The two ultimately came to an agreement where Neumann hired back some of the now unionized workers at $18.46 an hour with health benefits. At the end of their negotiations, Figueroa gave Neumann a union jacket, only the second time in his 17 years as a union officer that he remembers extending this gesture toward an employer. "You expect [Neumann] to be this stubborn, strong-willed guy, it’s my way or the highway," says Michael Gross, WeWork’s vice chairman. "And he’s the opposite. He really takes it in. He will immediately shift if he thinks he’s wrong and you can prove it through logic."

The union ordeal last summer coincided with the struggles of a handful of highly valued startups—Evernote, Dropbox, Instacart—to live up to the promise their valuations ordained, and the business media was quick to rope WeWork into the trend. Perhaps WeWork’s biggest sin was its aggressive projections: On track to open 40 new work spaces in 2015, WeWork planned to add a whopping 336 more by 2018, according to an investor presentation that leaked last August. Could the company really sign up 260,000 new members, plus get 34,000 people to join WeLive, in just a few years? (Critics also note that by banking its landlord discounts up-front, the company makes its current profitability look better.)

What WeWork is counting on is that a sort of network effect kicks in as its membership community grows. Minson, who joined WeWork from Time Warner Cable, says he views WeWork as "programming for real estate." That includes group discounts on back-office services like health care, payroll, and shipping, which WeWork has been steadily rolling out. But it also means the connections that form between fellow members—55% of whom end up doing business with one another, the company claimed last year. As Neumann puts it, when someone posts on WeWork’s member app that she needs an iPhone charger, "15 people offer one immediately." Part recruiting network, part sales tool, part referral system, WeWork sees itself as becoming the LinkedIn you actually love.

The programming concept surfaces again when I visit the first WeLive apartment building, in New York’s Financial District, in early February. Still a "beta test," occupying only three floors of a planned 20-floor operation, the space feels like Dorm Living 2.0. While hardly the $11 million townhouse that the Neumanns own, it’s plenty cool for a twentysomething who’s moved to a major city after graduation—an affordable version of the apartments you saw on Friends, so long as you accept a small bedroom. WeLive, like WeWork, doesn’t tie you down with annual leases, and your expenses for furniture and inspirational tchotchkes fall to zero. Community managers arrange taco parties in the common space. The mail room doubles as a bar, and the laundry room houses an arcade to facilitate making friends. A giant sticker covers the entire ground floor exterior window reminding everyone who enters the building that life is "better together."

Neumann, both of whose parents were doctors, says he moved 13 times before he was 22, making him a perpetual outsider. He was a conspicuous foreigner in his fourth- and fifth-grade classes, when his family relocated from Israel to Indianapolis. When they moved back a few years later, they lived on a kibbutz, one of Israel’s experiments in communal living. Neumann was the only kid who hadn’t grown up there. "Penetrating that community was one of the most difficult things," he says, "but once I did, it was, as a child, my best experience."

In part because of their upbringings, Neumann and McKelvey—who grew up in a commune of mothers in Eugene, Oregon—are fluent in the rhetoric of movements. Neumann has expanded his We Generation philosophy to include what he calls "Me plus We," which encapsulates his heightened ambitions. "On one hand, you want to be your own person, have your own goals," he explains on stage at the WeWork Summit. "And on the other hand, you understand that being part of something greater than yourself is an amazing opportunity and actually makes you stronger."

WeWork’s inspirational mottoes—"Do what you love," "Thank God it’s Monday," among many others—its evangelical faithful, and gatherings like the summit all have religious echoes. I can’t help but think about the utopias that have popped up in America for more than 200 years. "Start imagining it a bit bigger," Neumann says about WeLive, stoking his idyllic view, "an entire building. And then instead of having just one building doing it, five buildings doing it. Then you’ll be able to imagine what a WeNeighborhood or a WeStreet would be."

In the history of America’s utopias, of course, every single one has failed. A few days after the summit, Neumann and I are in his SUV swerving through New York traffic on his way to pick up his daughter at school when I bring this up. "I think you’re making a very good point," he says. "I will help you with it a little bit. The reason most people did not succeed in this idea [of community living] before is that nobody was ever able to write the check."

What Neumann means is that without WeWork’s business, its mission of helping people find purpose in their life isn’t feasible. And without WeWork’s energy, its soul, its vibe—in other words, its brand—there’s no way to attract customers to the business.

"A capitalistic kibbutz is not a bad idea," he says. "You need both." He doesn’t lift his eyes from the road.

Editor's Note: The print version of this story incorrectly identified Steven Roth.

A version of this article appeared in the April 2016 issue of Fast Company magazine.

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