I’ll agree that WeWork wasn’t the brightest idea ever. Well, except perhaps for Neumann. But that doesn’t excuse some smug git in New York getting the very basics of capitalism wrong:
The WeWork story is now a disturbingly familiar one, in an era when the economics of major start-ups can seem as surreal and ludicrous as whatever happens in the White House. Capitalism has always been a deeply flawed way of arranging a society, but big business, until around the 21st century, was at least bound by a few basic laws of monetary gravity. You were successful when you produced more revenue than the cost of running the business. You expanded when your profit margins increased.
Nope, that’s not capitalism, for if it were there would never be a new company.
All the titans of the 20th century functioned this way because what alternative was there? Ford or US Steel or IBM could not just lose money and indefinitely survive. Their stock would plummet. Headquarters and factories would shutter. In a few years, the corporations would disappear.
Indefinitely is doing a lot of work there. For the very reason for capitalism is that companies do start out making a loss.
You are worth the appeal of your idea to a bunch of rich people and companies who will keep giving you money in the hope that one day a fiction will be made real. You can keep losing money at spectacular rates as long as you, like junkie after the next quick fix, keep expanding, at whatever maniacal clip the market justifies.
And that, actually, is the idea of capitalism.
So, why do we bother? Why do we have investors at all? Because a new business idea needs money. It has to go and buy stuff in order to get into production – that’s also known as making a loss. So, we need to turn to outsiders, who have such money, to fund those losses.
Every new company is thus worth only the value of whatever appeal the idea has to the people with the money. Doesn’t matter who those investors are either – they’re buying the vision because nothing else exists as yet.
That is, our smug NYC git is complaining about the very reason we have the capitalism in the first place, new adventures require capital.
The press eh, guardians of democracy and gatekeepers to truth.