Charismatic leaders in business can have a tendency to make irrational, uncalculated moves. However, observing certain CEOs can make you question their motives, and gain foresight to their downfall. The stories of Adam Neumann and others serve as cautionary tales. Here’s how the founders behind WeWork, Peloton, and Zappos cloak their corporate concepts with cult-like undertones.
WeWork: Hook, Line and Sinker
WeWork is a commercial office-leasing company that profits off of renting office space. It is the brainchild of cofounders Adam Neumann and Miguel McKelvey. The Hulu documentary, WeWork: Or The Making And Breaking of a $47 Billion Unicorn exposes the corruption within the company, and the downfall of one of its leaders. The film especially highlights WeWork’s employee culture, Neumann’s captivating—and manipulative—personality, and how he deceived so many people. To illustrate said deception, here are some of the red flags pointed out from the film.
Both Neumann and McKelvey grew up in communes, so they value community more than the average city kid. That being said, while living in New York during the financial crisis in 2008, they aimed to create something different. As a result, Neumann took notice of how most office space companies have corporate and institutional ambiences—like Regis, for example. But these companies lacked a sense of community, so it was Neumann and McKelvey’s time to shine.
One particular scene from the documentary shows Neumann’s habitual claims of distinguishing his company from being a real estate company. He certainly insisted that he doesn’t buy the properties. “We create long-term leases with landlords, and we take up the space and we break it up and create a community,” Neumann says. However, Neumann took some of the proceeds from the sales of his stock in ‘We,’ purchased buildings, and then leased them back to WeWork. This of course, made Neumann part-owner of some of those same buildings, as both tenant and landlord.
Additionally, Neumann started WeLive, a subsidiary of WeWork where employees co-live with Murphy beds and dorm style living. The concept of simple, community-oriented living attracted WeWork employees. However, they didn’t realize how risky the blurred lines between working and living would become.
Adam Neumann: A Wolf Dressed In Sheep’s Clothing
Neumann had a way of holding the room—he knew exactly how to connect with people and persuade them to listen. In fact, his power of persuasion tapped into the mindset of young entrepreneurs with “yoga babble” and by spreading the spirit of ‘We.’ Nevertheless, people easily bought into the mission and didn’t get paid much, which is common in a startup. WeWork employees were being promised dreams—idealistic dreams—with no means to an end.
In her Bloomberg article, Ellen Hunt examines how WeWork employees were mistreated in more ways than one. ‘”I’m young; I’m a millennial; and we don’t really know our rights,” said Rachel Wynn, a 27-year-old former associate community manager in Washington, D.C., who left in 2015 and is planning to pursue a lost-wages case against WeWork. She and other former community staffers said they gave office tours and hosted events at the space. But they also spent much of their time brewing coffee, arranging catering and fixing printers. Sometimes the job involved catching mice and dealing with office party detritus, including used condoms in the meditation room and vomit in the phone booths.”
The film also shows WeWork selling this idea of stock options—a type of equity compensation given by companies to their employees—with equity being a common buzzword. This is where employees are given the right to purchase the company’s stock at a specific time. Only, the amount of stock that was available was minimal. “You all have equity in the company” says a former WeWork employee who was quoting Neumann.
Additionally, WeWork also held a summer camp for their staff. It was all about partying until the night was day. The film shows clips of the festival scenes, with employees getting hammered and worshipping Neumann who would own the stage. Several years later, however, the scene began to change.
A Top Investor, A Botched S-1 Filing, And an IPO Flop
Masayoshi Son, Japanese billionaire and founder of conglemorate holding company Softbank, was part of a pivotal role in the development of WeWork. He also goes by the mononym ‘Masa,’ like Beyonce or Madonna. Immediately, Son gave Neumann a generous investment. Without a doubt his contribution was exactly what Neumann needed in order to make WeWork reach tremendous heights. Thanks to Son’s investment, WeWork was able to go global and expand massively.
Seeing the global success of WeWork, Son wanted to take a majority stake in WeWork by investing $16 billion more. But he was cautious. Eventually, Softbank decided to just put up $2 billion. This wasn’t enough funding for WeWork to sustain itself, so Neumann started planning for an IPO. And that’s where things began to spiral.
Along Came Scott Galloway: The Advertising Theorist
“WeWork is always ready for an IPO,” Neumann responds to a journalist during an interview with Ashton Kutcher. When she asks what he’s looking for, his response says it all. “I want to elevate the world’s consciousness.” What?
Bestselling author and NYU professor Scott Galloway analyzed the company’s S-1 filing as they prepared for an IPO under the new name, ‘The We Company.’ The first page of the prospectus reads “Here’s to the power of ‘We.’” In addition to this, Galloway mentions the ambiguity of the message; how it can basically represent any idea—and not just a shared office space company. He points out that the CEO’s name was mentioned 165+ times, which is above the norm—usually 15-50 times.
Furthermore, ‘Adam,’ not ‘Mr. Neumann,’ was the way in which he referred to himself in the S-1 filing. This is unorthodox for a financial document. The decision to only refer to Neumann’s first name was off-putting, and reeked of a forced reverence. “There was definitely kind of this Jesus complex seeping into the financial document,” says Scott.
Consequently, Scott’s Business Insider post went viral immediately.
The Man is The Head, but the Woman is the Neck That Turns the Head
This quote by Nia Vardalos represents the manipulative nature of Neumann’s wife, Rebekah Neumann. Neumann pushed his co-founder McKelvey to the side to make room for Rebekah at WeWork. WeWork employees weren’t sure what to make of her position. She started expressing her power by implementing unexpected changes in the company.
Remember the staff summer camps that were actually festivals? At this point, attendance became mandatory. Employees were forced to sit on the grass while Neumann and Rebekah spoke from a stage. They went on about morals, and their goals of ending world hunger and other dire crises. In fact, most employees excitedly and routinely chanted ‘We work! We work! We work!” (yikes). But others were put off by Neumann’s fervent ambitions, as they thought that they just needed to get the next WeWork built.
In addition to the forcefully revamped summer camps, Rebekah started WeGrow, a private school subsidiary funded by WeWork, to ‘reinvent’ education. The film shows a clip where Rebekah is being interviewed on the matter. “The mission of WeGrow and quite honestly the collective ‘We’ that we’re all living under is to elevate the world’s consciousness. And ‘WeGrow’ specifically through unleashing every human’s superpowers and expanding happiness.”
Guess how much tuition costs per child? More than $42,000 a year is the cost of enrollment.
Thanks to Rebekah, WeWork was now also going vegetarian by virtue of encouraging environmental consciousness and a carbon-free world. Employees were no longer allowed to expense or bring meat to any of the facilities. But the double standards remained. Neumann’s rules for others did not apply to him. He went to glorious vacations and enjoyed steak dinners. There is a six-episode series in a popular podcast called ‘Business Wars’ hosted by David Brown. In episode four of the podcast, WeCrashed: The Rise and Fall of WeWork, Dick Marco (former WeWork employee) points out Neumann’s hypocrisy. “You know you have to realize, when you fly your private jet, you’re probably doing more damage than anyone in WeWork.”
Peloton and Zappos
Zappos is an American online retail company founded by Nick Swinmurn. However, when Tony Hsieh took over the company, the cult narrative began. In her Quartz article, Aimee Groth examines Zappos as a company that meets ‘most requirements’ on a cult-indicator checklist. Some markers of the checklist include black-and-white thinking, multiple levels of membership, and control/oversight.
Like Neumann, Hsieh also shared a familiar inclination to community-oriented lifestyles. Hsieh was in charge of The Downtown Project, a renewal project in downtown Las Vegas. His vision with it was to create a desert utopia experience for Zappos employees and adult entrepreneurs (sound familiar?). Mackenzie Dawson of NY Post says “it would be like Burning Man all year round, Hsieh hoped. But when where you worked became intertwined with where you lived, even how you lived, it could become something else: a cult.”
Peloton is an American fitness equipment company founded by John Foley that famously sells expensive stationary bikes and subscription fees for classes. Thanks to the pandemic, Peloton doubled its revenue as many people finally decided to keep that “I’ll exercise more” new year’s resolution. Olivia Petter of Independent writes about Peloton being a cult. “State-of-the-art equipment aside, what attracts many users to Peloton is its emphasis on community,” says Petter. There’s that word again. “While you can take classes on-demand, you can also do them live, an option which Peloton say is preferred by many given that this allows you to see who else is taking the class with you, and where in the world they’re located.”
What We Learned From Corporate Cults
WeWork, WeGrow, WeLive, but when will we learn? What is it about these new-wave cults that is enticing to consumers? For one thing, millennials are attracted to these types of companies. Companies that rise against the grain of ‘standard’ corporate foundations. Neumann’s reimagining of a modern workplace attracted millennials like a moth to the flame. Zappos and WeWork’s company culture blurred the lines between life and work. Employees and users alike felt a communal ambience where they could network, share ideas, and share (many) drinks.
Companies like the ones listed above use familiar words like ‘family’ and ‘community’ to entice newcomers onboard, making them believe that they are anti-9 to 5. But as it seems to be so clear, it’s these very words that should serve as red flags to consumers and observers alike.