Name: Brainstorm Tech 2023: Go With The Flow
Uploaded: 2023-07-11
Duration: 15 min 37 s
Description: Adam Neumann, Founder, Flow; Co-Founder and Former CEO, WeWork In conversation with: Michal Lev-Ram, FORTUNE

Adam Neumann, Founder, Flow; Co-Founder and Former CEO, WeWork In conversation with: Michal Lev-Ram, FORTUNE

Brainstorm Tech 2023: Go With The Flow 

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We're going to keep moving along. Our next guest has redefined many boundaries, brick mortar and then some seven years ago, he made his debut on our stage when his fast growing and much hype company was rumored to go public and I think we probably all followed the roller coaster ride of what happened next. Adam Newman is the co founder of wework, a company that pioneered the concept of co working reconfigured the workplace landscape. Adam stepped down as CEO of the company in 2019 after we worked out to shelve plans for an IPO and now Adam is on a new journey. His current mission is to transform the soulless experience of renting, find a solution for America's fractured housing market. So to talk past, present and future, please welcome back to brainstorm tech's. Adam Newman have a bit. Um Adam, thank you for joining us. I'm going to start with a very basic question, but I think one that probably a lot of people are wondering and that's just why are you here? You know, obviously we invited you to come speak. That's part of the reason, but I want to know why are you back in front of this particular audience. And why are you at it again with another company? I think first of all, thank you for having me. And always nice to see a great face in the audience. And Park City is beautiful. I've never been here in the summer. It's unbelievable. Very nice to see. I think in life, we go through many journeys and as we go through these journeys, we have different lessons that we learn. But if we learned our lessons and we don't get a chance to do it again, then I don't think you can really apply it. And I think when things happen in your life, if you took time to think about it and learn from it and then you apply it, that's a great journey. But if you actually did learn from it and you stopped and something happened, it becomes a tragedy. So I'm here because I love entrepreneurship. And I think this category and this problem is real and we're excited to do our part in trying to solve it. So we're going to get into flow and what you're doing with it today, what your hopes are. But I want to talk about those lessons learned first of all and just ask you, you know, you've had quite a bit of distance and time now from wework. I looking back with the space that you have and the perspective, what do you think were the biggest mistakes? What are the biggest learnings that you take with you today. So when I stepped down in 2019, I actually took the time to think a lot and had a great team around me that were able to talk and discuss all the different things and there are many lessons. But first of all, I would say I'm extremely proud in what we did and we work, I'm proud of the team. We, today we work has over 700 locations. It's in 39 countries, it's in over 70 languages. And I don't think there's a person on the planet who is building a new office space today, who's not thinking what would or wouldn't we work? Think so. I think that part is great as far as the lessons and there are many and we don't have enough time today. This is a short interview, but I'll focus, I'll focus on two that come to mind right now. One as an entrepreneur, there are many things you don't control. One of the only things you control is who you surround yourself with and not just who you surround yourself with. But exactly what kind of people they are. I think in we work, we're surrounded by very smart people, but moving forward, what I surround myself is not just very smart people, but also people are very comfortable telling me what they think. And when you need to tell someone what you think and they don't agree with you, you need to have the courage and you need to be empowered to go back again and say it again and again and again. So my first lesson surround yourself, not only with the best people and the smartest people, but also the ones who are going to tell you what they think. And it means if you don't listen, they're going to keep at it until you either never see them again or until you agree. That's one, the second one is listening. The first lesson doesn't work without the second one. After when I stepped down from my work, I had the opportunity to become an investor and our family offices invested in over 50 different companies. And I got to be the investor giving the entrepreneur advice and seeing that the entrepreneur is not listening and getting a little frustrated until I realized that maybe this is part of how I used to act. And I realized that part of being a great entrepreneur is not just listening, but listening to the hard truth, listening to the things you don't want, they have to choose to choose who you surround yourself with and become a great listener and great listeners like to listen to what they don't want to hear, not what they want to hear. So do you if I'm to like put all that together? Do you think that your investor at the time at wework could have played a larger role in not helping to create what was a spectacular rise and then a spectacular fall. I mean, what was your role there? And what was your investor's role? Again, as I said before, I am so proud of what we did in Monday night's quarterbacking. Is that what you call and doing that now with the investors and what they should have done? I can tell you one thing, no one from the outside ever knows what happens on the inside. And again, I think very few people disrupt categories and very few companies reinvent categories. Office is the second largest category in the world. And I'm very proud of what was achieved. Ok, I want to ask you about um my understanding is that there were, there were several components of your exit package which was controversial at the time. Um But one of those components was also a non compete agreement. And when does that expire? Our non compete expired? It's actually noncompeting and unsolicited and that expires October 30th of this year. Ok. So what happens then does this mean that you with your new company which we will get to in a second compete with? We work to answer that question. I would have to explain what flow is because I think the answer is slightly more complex. So for those of you who don't know flo is building a, I heard the mission, you said before, I'm not sure that's actually our mission, but it sounded interesting correct that. So good. So good. We're not ready to come up with that yet, but flo is building a consumer facing residential brand and we're doing it through integrating technology community and a world class operating team that puts the resident first. And just some numbers for those of you who don't know, 66% of young adults in this country are renters and they spend 34% of their total income on rent. And yet there's no rent, no promise, no elevated experience in in the past Howard Schultz, who was a great entrepreneur and also a company that I really admire came up with the concept of the third place. He would say the first place was the home. The second place was the office and the third place was Starbucks where you could get a cup of coffee, meet someone and be surrounded by other people. I think in a pre Corona world that was amazing. I think in a post Corona world, what Flo is observed is that it's not anymore the first place or the third place. It's the one place and in the one place, you have to integrate everything our residents, which we survey regularly. 70% of them spend between 2 to 5 days working from home in a reality where work from home and living has become one a place where our home is changed and our relationship to our home has changed. I don't think a lot of us think there's anything more important than that. The new solution for the future of living needs to be more the one place as opposed to the first or the third. And that's what flow is going to do. To answer your question. You said is flow. I think what you're asking is what's flo going to do well and does flow, where does, where does we work end? And where does flow begin? And where do they dovetail? Compete? So you're asking is flow going to compete? I think with not, I think I know in a world where the one place is the new solution where work and living has been integrated, we're not ready actually for these solutions because these buildings have not been designed for that. The operating systems are not there, the tech is not there, the teams are not there to run it. I think flow has only two choices, compete or partner. OK. So compete is one of the choices comp is one of the choices or partner. OK. All right. Well, maybe it would help if you, you know, I think we get kind of the philosophy and the need in the, in the market that you see for flow. But give us a bit more of a concrete breakdown of what is the business model? Do you own these buildings or not necessarily? And how does the company make money? So I'm going to add one more thing and then I'm going to answer that. In May, the surgeon general came up with a study defining loneliness as an epidemic in the United States. He was saying that it's going to cause loneliness, it's going to cause mental illnesses, it's going to cause early death. He was giving all these different definitions and quoting tremendous amount of study. We live in a world where we're so connected. We've never been more disconnected even though we love technology and flow is tech first and product. First, we use technology as a tool to achieve the mission and the goals that we have not as the end goal. And with that in mind, it has to all be brought together perfectly. So we think the best way to do that business model, we own 3000 apartments that we're running. We have over 150 employees and a majority of engineers, product designers, both digital and physical. We're actually looking for a lot more great employees. And the business model that we have is a vertically integrated system. We own the buildings, we operate the buildings, we build the technology, we build a community and we build the teams that are running them. And when you bring all of that together, the moment a resident is happier, more fulfilled and stays longer. The buildings churns goes down, churn is the amount of times people leave a building and the building is immediately more profitable. Happier residents more fulfilled residents equals more profitable buildings. We've already proven this on our first two buildings. And this is something that in real estate you don't see often because real estate is not treated as a consumer product. Even though it really is. The reason it's not treated as a consumer product is because it's a supply challenge, not a demand challenge. You raised $100 million from Mark Andreesen. Correct. No, no. Sorry how much? Um, 350 million, excuse me, I should have looked at my notes. 350 million. That's even more mind boggling. I want to hear about just very briefly, tell us about just why you think this is a good match. And Dr Horowitz and, and you, and also curious to hear, you know, not everybody gets a second chance and not on this kind of level, of course, 3 50 million. Um Why do you think Mark believed in you and wanted to put his money in you? So a few things first, we spoke about lessons learned and we said one of them is surround yourself with the right people. Mark and Ben and A 16 Z are unbelievable investors. They're actually investors who started as entrepreneurs, they run multiple businesses and created multiple businesses when they're in the boardroom and we're discussing, not only is no one holding anything back, the kind of advice we're getting has a lot to do with building a long term business also. And this is something amazing about Mark. After our first board meeting, Mark called me the next day and he goes, Adam, I wanted to give you some feedback about something I heard in the board meeting. And I said, of course. And then he gave me the list of all the things that he disagrees with. Not the things he said in the board meeting with. There are a lot of other things that he thought about afterwards and he said, I don't want to come too hard, but that's what I think. And I said, Mark the deal we made when we did this deal is that you always tell me exactly what you think and I will do my best to be a great listener. And that's been the relationship ever since they've turned out to be even greater partners than I would imagine specifically to what you're asking. I am sure there are people who deserve to get investments more than me. I am sure there's a lot of people who deserve, who don't get it. And I hope because I really believe in entrepreneurship that the people who deserve to get this investment will get it because I also think that to build the future, we need start ups and we need innovation. And that's what this conference is all about. I think it shouldn't matter what race they come from, what gender they come from, where they come from. Nothing should matter and everybody should get their opportunity specifically why I got the second chance that you should ask a six OK. Question from the audience. Please raise your hand. We'll bring a mic over to you quickly. We've got one right here, Mark Johnson CTO. Stand together. Um Sorry, what's your regulatory barriers? Do you think you're going to face in building flow? So great question. There's a lot of basic things in residential real estate that are already a effect. So we have to follow all the rules that exist. It's actually a very advanced category when it comes to that. But a very early category when it comes to actual innovation or technology or giving a new experience, whatever they are, we take them extremely seriously, but they change between state to state and it depends if you're owning the building, building, the building, operating the building and then flow starts there. But over time probably grows outside of these multi family buildings. There's tremendous opportunity to where this brand can go to. Do you do you by the way? Um I know one of the knocks um after this one was, was published um was in how you described the company and earlier on too, you know, the fact that um the valuation was where it was and that uh you know, there was yes there was tech involved, but it was real estate. Are you comfortable today? Describing flow as a real estate company or what is it, what category is it in. I can't answer the end without answering the beginning. I'm a little bored of talking about the past. But if, if we must, our valuation was given by the most sophisticated values in the world. It was Goldman Sachs and JP Morgan and Morgan Stanley, it was Softbank and Benchmark and all the other investors that are considered the best investors in the world. So when people knock our valuation, they're really knocking all the people who gave that valuation evaluation is something that's given by a person that wants to actually invest the money. Putting that aside. We used to describe we were many different ways, flow is very comfortable being a residential consumer facing real estate company. It is the largest asset class in the world. It has no brand that we know of and prop tech in that category is still very early because whenever you solve these problems, everyone is solving them as a single point problem as opposed to actually solving them as a vertical integration problem. So the way we're going after it is going to take longer, we're going to have to build a very solid foundation. But when we do, I think our solution is going to actually help solve problems like loneliness community. And I'll say one more thing. And I think we live in this world today where I'm not sure we need more followers. I think we need more friends and I think we can all appreciate a lot more face to face interaction and maybe a little less face time. Well, Adam, we appreciate you coming, getting dressed up for us, no T shirts today. Um But thank you so much for coming and looking forward to seeing what you do with flow. Thank you for having me.