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WeWork 'cult' bedevils the Warren Buffett of Japan

Hulu documentary asks tough questions of SoftBank's Masayoshi Son

| Japan
Masayoshi Son speaks during a news conference in February 2020: why he fell so hard for Neumann's snake oil.   © NurPhoto/Getty Images

William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades."

Hulu's new WeWork documentary is tough on former CEO Adam Neumann and the founder worship that leads many Silicon Valley investors astray. It is arguably even harder on SoftBank founder Masayoshi Son, and for a good reason.

The ultrawealthy dupes behind confidence men like Neumann make possible the hubris, idiosyncrasies and theatrics that enable these wannabe corporate rock stars. And Japan's richest man continued to lavish billions and billions of dollars on Neumann, underwriting his extravagant spending, private jet misadventures, weird corporate structures and hiring family members.

All the red flags Son ignored are highlighted in WeWork: Or the Making and Breaking of a $47 Billion Unicorn. Just as Hulu was promoting the film, another tale of founder worship run amok made headlines. Hollywood might next want to tackle the epic stumble by Bill Hwang's Archegos Capital Management. There is even a role for some of Japan's most iconic financial agencies, including Nomura Holdings.

Somehow, New Yorker Hwang convinced honchos in button-down Tokyo to look past a 2012 insider-trading guilty plea because of his pedigree. Hwang is an alumnus of Julian Robertson's fabled Tiger Management hedge fund. That smart bankers were too wowed by this association to see the con drew comparisons to the Long-Term Capital Management debacle of 1998.

Back then, investors were so star-struck by the presence of famed Salomon Brothers trader John Meriwether and his Nobel laureates to see risks ahead. Its crash inspired the 2000 book When Genius Failed. The through-line to today's Archegos Capital to supposed geniuses failing at WeWork, too, is impossible to miss.

And it still leaves Son with some real explaining to do about (a) why he fell so hard for Neumann's snake oil; (b) his failure not to cut ties sooner; and (c) SoftBank's stubborn effort to prove WeWork is still a good idea after all.

When Son called WeWork the "next Alibaba" in 2018, Sigmund Freud was in the room. Son's role in helping to discover Jack Ma in 2000 is its own through-line to the 2016 creation of SoftBank's Vision Fund.

The spectacular home run Son hit by handing $20 million to the then Hangzhou English teacher created his Warren Buffett of Japan myth. By 2014, when Ma took his e-commerce juggernaut public, Son's stake was worth some $50 billion. Son's roughly $100 billion Vision Fund was about getting lightning to strike twice.

Oddly, Son chose to make WeWork a cornerstone of his strategy. Watching Hulu's autopsy, it is a wonder how a savvy chieftain like Son missed that WeWork is a leveraged property investor dressed up as a new-economy tech disrupter. How, too, did Son's broader venture capital team fall for Neumann's cheesy used-car-salesman talk of changing the world?

Partly, perhaps, because Son's own rhetoric can often get away from him. What else are we to think of his 300-year time horizon, and all that talk of betting on the "singularity," that moment when computers outthink humans. This is more the stuff of Elon Musk's social media feed than the Sage of Omaha.

Son also seemed to get caught up in the fun of running with the cool kids. Neumann's leather-jacket, long-haired vibe was more 1990s rocker than tech geek. Neumann also attracted a "cult" like entourage, ascribing some new-age philosophies to the man. A devastating September 2019 Wall Street Journal story laid it all bare, including details of a cannabis-infused private jet flight to his native Israel, on Son's dime, presumably.

We have seen this all-charisma-no-clothes movie before. Take Theranos, which inspired an HBO documentary. Elizabeth Holmes made her blood-testing company a sensation by loading her board with luminaries like Henry Kissinger. This cult-of-personality model had investors suspending disbelief.

Elizabeth Holmes speaks at a conference in October 2015: we have seen this all-charisma-no-clothes movie before.   © Reuters

Investors are giving Son the benefit of the doubt. As a 2017 Reuters op-ed dubbing Son "a one-man bubble-blower" suggested, questions abound about whether his strategy of sprinkling huge piles of money on startups everywhere will work.

Silicon Valley gadfly Kara Swisher, co-founder of the Recode portal, has highlighted how Son's "short due-diligence process and willingness to drastically outbid rival investors" can encourage bad behavior that imperils his long-term vision. When you consider the vast sums of capital sloshing around Son's ecosystems, inflating already-frothy tech valuations, it is easy to see where things connect to LTCM and Archegos Capital.

It is easy, too, to worry about the folly of sticking with a company better named WeDead. The pandemic alone is putting office-sharing hives out of fashion. A $47 billion WeWork valuation was always bonkers. Its business model is an easy one to copy. Rather than just write it off, Son still hopes to take it public.

Granted, SoftBank shareholders will give Son some room here. After a truly awful 2019, when WeWork scrapped its initial public offering, Son made good in 2020. SoftBank made $11 billion in the October-December quarter alone.

But one does not need a Nobel Prize to understand the concept of opportunity costs. The time Son and his assembled geniuses spend obsessing over Neumann's mess is time not spent finding more worthy startups that actually might change the world. Or at least give SoftBank shareholders a happy ending.

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