Something I’ve been thinking about today is WeWork and it’s relation to that article about boozy return to office culture, and also the ancillary impact WeWork may (not) have had on the adoption (ish) of remote working culture in the United States.

I would argue that WeWork was a place where people who didn't have a traditional job paid to go to have the trappings of a traditional job. It was "performative" jobbing - you have a place, they have a coffee machine except also kombucha, there's an HR and an IT department except you pay them instead of the other way 'round, and unlike real work, no one ever tells you what to do. It was a place you could put on the business cards you yearned to hand out that hid the fact that you lived off your allowance while perfecting your Shark Tank pitch for cat underwear or some shit.

I would argue that WeWork culture was wholly and completely separate from "office culture", which is the disconnect I failed to observe earlier.

The "boozy return to office culture", as described in this WSJ article, is all about giving people a reason to put up with shitty office intrigue and a lack of autonomy. Combine that with "hot desking" and hybrid work and I think we're in a place where the whole "office routine" is being renegotiated. Companies are throwing shit at the wall to see what sticks.

I think there will be a lot of simply assuming the contracts.

WeWork was predicated on this idea that you had a "membership" that allowed you to jet around to all these other offices all over the place and I think that business model is done for a few years at least. At which point you recognize that your landlord isn't WeWork, it's whoever actually owns the building. I've probably linked these guys a half-dozen times; subleasing isn't fucking rocket science.

THIS.

WeWork goes away, but the tenants stay and begin paying slightly higher rents to the building owners. Because the owners don't want the space vacant, anyone paying WeWork's rent can afford a little more, and the building landlord just hires someone to manage all the "small" contracts that were too small for them to consider as renters before.

That is, once people are allowed to go inside the buildings again....

“WeWork believes in the long-term prospects of our locations and our relationships with landlords across the world,” a WeWork spokeswoman said in a statement, while trying trying to maintain a straight face.

Fixed it.

...which matters little as WeWork's core assets are a hole in the ground at this point.

They've even knocked $10m off the jet.

BAM

WeWork is suddenly worth $20b.

https://www.mauldineconomics.com/frontlinethoughts/the-growing-economic-sandpile

You will likely read a lot about "black swan events" in the coming weeks and months. This phrase was coined by Nassim Taleb to explain how we can't predict what bad shit will happen. Nassim Taleb is a fucking dumbass however because he goes on to jump from "we can't predict what bad shit will happen" to "we can't predict THAT bad shit will happen. Literally four pages into Black Swan he argues that nobody predicted Hitler therefore nobody could have predicted WWII.

The problem with this thinking is that one of the fundamental arguments at the Treaty of Versailles was that excess punishment of Germany would lead to recriminations and that harsh economic conditions would likely lead to a resumption of hostilities. Both Churchill and Wilson argued that bad shit was likely to come out of Germany and launch the war again. They argued at length, they argued publicly. Taleb's right - nobody predicted "Hitler". But that doesn't matter because half the people paying attention predicted "a phenomenon like Hitler" and does it really matter what his moustache looks like? German encirclement was a theme going back to the fall of the Hapsburgs. German antisemitism was a theme going back to the Crusades. German nationalism was a theme going back to Napoleon. Populist racism leading to apocalyptic war? It was on a lot of bingo cards.

It's been unpopular to argue that all isn't well just because the stock market goes up. There hasn't been a lot of press for everything that's wrong in the market. It's all there - the data's right where you can see it. This whole repo mess that nobody is still talking about is fundamentally the central banks losing control over the market but why talk about that if the Dow is up?

So yeah - Saudi Arabia needs money because Aramco is now under IPO and there's convincing evidence that they hit peak oil in about 2001. Russia needs money because their population is aging and they've got a $300b budget shortfall (how quaint). They're in a three-way snit with Turkey over Syria right now - Saudi Arabia and Russia could make an agreement but Turkey is putting up drilling rigs in contested waters around Cyprus so it's pretty clear to anyone paying attention that an agreement between the two of them would be short-lived.

But nobody is paying attention because this is a "black swan."

John Maynard Keynes argued there are two ways to assess what something is work: "Firm Foundation Theory" and "Castle in the Air Theory." Firm Foundation Theory posits that something is worth the amount of money it will make you, adjusted for the risk you take on buying it, minus the amount of money you can make risk free. "Money it will make you" is a basic thing to approximate. "risk you take on" can be approximated a whole buncha ways. You end up with a number, or a spectrum of numbers, but fundamentally you end up with a reasonable model of value.

Castle in the Air theory posits that something is worth what you can sell it for.

Firm Foundation Theory has had no place in economics since 2008. Ever since central banks pumped all their money into the financial sector, there's been no good way to determine what something's worth because the central banks are maybe/maybe not guaranteeing some portion of that risk. Bear Stearns? No backup. Washington Mutual? No backup. Chase Manhattan? The Fed will pay JP Morgan to buy it. What's a bank worth? Who knows. Comes down to what kind of mood Bernanke was in. Pissed a lot of people off. But you still gotta make money.

So you value everything on what you can sell it for, not what it's advantage over risk-free return is (it helps that your risk-free return has been "under inflation" for twelve years). "I'ma buy into WeWork at $40 billion because some dumb asshole will buy it off of me for $80 billion." "I'ma buy into Tesla at $700 a share because some dumb asshole will buy it off of me for $900 a share." "I'ma buy into Amazon at $1000 a share because some dumb asshole will buy it off me for $1500 a share."

Amazon is allowing profiteers to gouge Purell at a thousand percent and this populist government is failing miserably. Suppose Bernie Sanders wins the election and decides to break up Amazon? Is it still gonna be worth $1500 a share? Because Amazon has never paid a dividend in their life. their business model is literally destroy everything, become the one store in the universe, profit.

So. Did a whole bunch of prognosticators have "pandemic" on their bingo cards? doesn't matter:

1. Economic dysfunction will be the main driver of the international system in 2020. Economic stress does not simply flow from whether the economy grows or declines by a percent; it arises from shifts in the pattern of economic behavior. This in turn affects social realities and leads to political instability. Growth may continue, but a dramatic slowdown in growth can have significant consequences. We forecast a slowing global economy.

2. The most important dimension of the slowdown will be the increase in social instability, which was triggered by the 2008 financial crisis and ameliorated in recent years but will now accelerate. Internal tensions in many countries are already underway and will become more intense and less manageable in 2020.

3. Nations most vulnerable to the slowdown will be exporting nations. The countries that will be most destabilizing to the global system will be major economies that are dependent on exports. Germany and China are the most vulnerable and will have the greatest impact globally.

It's like a forest fire - it doesn't matter all that much if it's a stray cigarette or a badly-grounded hot tub that sparked it. When the whole place is dry tinder, it's gonna burn eventually.

Holy shit.

I'm a huge believer in coworking spaces, have actively used and promoted them, and have been a member of - and know people who currently are members at - WeWork.

I had never heard of SPE's, though. That some crafty financial skullduggery, right there.

And a wicked-rickety tower to stand $20bn of valuation on top of!

I still like the Office Nomads model: Own the building. Full disclosure: I was a tenant for several years, and am personal friends with the owners.

Fundamental value theory states that a stock is worth the future value times the odds of it going up divided by the odds of it going down minus the value of the starting investment in a risk-free vehicle.

Castle in the air theory holds that a stock is worth what you can sell it for.

Fundamental value theory has been out of vogue for twenty years. WeWork is worth $47b because you'll be able to sell it for $80b in another couple years (right? right!).

ETFs are the way to go because everybody knows that ETFs are what you want to buy. Until ETFs are what you want to sell and suddenly, ETFs aren't worth as much.