Co-working, the service WeWork provides, is just a fancy name for a shared office. It has been around for ages—the multinational Regus has rented offices by the month and conference rooms by the hour since 1989, for example. But in 2005, the software engineer Brad Neuberg reinvented the idea for the burgeoning tech economy. Co-working fused the individualism of tech bootstrapping with the collectivism of social movements. Offices got sharded into realms as small as one desk—every founder his own sovereign, but all contributing to that great collective: entrepreneurship.
The dot-com era had been formally corporate and exceedingly costly—all that money got spent on expensive office build-outs. Companies often bought their own racks of servers, connected to the internet on pricey leased T3 lines, running expensive Oracle software. The next time around, tech would grow on efficiency—and by disconnecting itself from the burdens, and expenses, of the bricks-and-mortar world. By 2006, Amazon had started selling access to the infrastructure it had built to run its website, marketed as Amazon Web Services (AWS). The “cloud” industry, now worth hundreds of billions of dollars, turned all that infrastructure into a scalable, just-in-time service accessible to anyone. Co-working lured and then bred those anyones, blending their capitalist and bohemian ambitions.
The early co-working spaces looked more like flophouses than offices, but after the Great Recession, the idea both flourished and corporatized. WeWork then took the appeal of co-working spaces and turned it into a viable, holistic solution for businesses of all kinds. Leasing office space, especially in major cities such as New York or San Francisco, is difficult and expensive. Like AWS had done for servers, WeWork offered flexible, affordable arrangements for one person or 100, easily scalable as needed. Global access, event spaces, and even custom build-outs of entire floors, old-school style, are on offer. But so are “hot desks,” office suites, and, of course, IPA-provisioned pantries.
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Unlike most earlier co-working spaces, WeWorks provide operational services—not just catering and reception, but also financial, legal, IT, and all the other plumbing that makes it arduous to start and run a business. This full-service offering appeals to companies large and small, fledgling and flush. Your middle-class Facebook friend with the lifestyle business might have signed on, but so did Slack, a $12 billion public company. WeWork allows both of them to reduce their capital outlay, decrease their operational complexity, and outsource the risks of a physical plant—to one service provider.
This promise helped WeWork swell into a real-estate behemoth. It employs 12,000 people and occupies more than 20 million square feet of office space; last year it became Manhattan’s largest private tenant. The firm, now rebranded The We Company, has raised more than $12 billion in capital and until recently was valued at $47 billion. But in the last year alone, it incurred losses of almost $2 billion; over the past week the company’s valuation was cut to $20 billion, its IPO was postponed, and its co-founder Adam Neumann stepped down as CEO. Profits have eluded the company; now prophets do too. The boutique agencies and app-devs and even unicorns can save costs by outsourcing office services to WeWork, but eventually someone has to pay for all those things. As my colleague Derek Thompson put it, companies like WeWork have been “selling magic shows at a science fair.”