Everyone is divided into two camps in our current economy: those who believe we're hurtling toward a recession, and those who believe we're merely experiencing some temporary rough patch.
A big point was made in the "not a recession" column. When the economy is in a recession, Silicon Valley venture-capital firms don't give ousted founders $350 million to recreate their failed idea in another market. The investment in Flow, a new real-estate company from Adam Neumann, was announced by the co-founding partner of the vaunted venture capital fund. The man flew WeWork into a mountain.
Money of this size is not enough to finance Flow during a recession. This is a sign that the economy is doing well. It is an embarrassment for the tech industry.
It's comforting to know that you can be redeemed if you are a white dude who is rich. I am sad because I am not a white dude with money and connections.
Neumann launched an idea called We Live during the WeWork days. Flow will own and manage Neumann's apartments. As if no one can crack an egg without breaking a finger and crying is what the letter pitched this business was like. He said that people in apartments are reluctant to bring friends and family to visit because they don't have any equity in where they live.
According to the letter, the main problem with housing in the US is that it's not sexy or fulfilling. That isn't the problem with the housing market. Rents are going up because there is not enough housing to go around. Two years ago, he said what we need to do is build. Neumann wants to turn existing buildings into giant McDonald's play places for adults. It's like telling someone with a broken arm that the problem is not that their arm is broken, it's that their cast isn't pretty enough, that it could use a little bit of flair.
This isn't the first time that he has shown that he isn't interested in real solutions to the housing shortage. They wrote a letter to the mayor and the town council in Atherton, California, after they tried to build more multi-unit housing. The quality of life of the couple and their neighbors would be negatively impacted by more multi-housing, the couple wrote in a letter reported by The Atlantic.
The real solution to the problem is much harder than a new look. The city was asked to reject building by the couple.
The most pressing problem in our economy right now is inflation, and failing to solve it has real implications. The analysts at Goldman said in a recent note to clients that inflation would remain high for some time because of the elevated cost of shelter, despite the fact that inflation was abating.
He wrote that Flow would give renters an opportunity to build some kind of equity in their apartments, though he didn't give any details on how that would work financially. I asked the Wall Street brains about that aspect of the plan and they didn't know much about it.
Vicki Bryan, a credit analyst who's the CEO of the research firm Bond Angle, told me that the hook is that renters get a tiny share of equity that never amounts to anything. They wouldn't be able to get a controlling interest. This is what I think. It is similar to buying from the company store.
The store is always innovative.
The Flow deal is the most efficient way to light money on fire in Silicon Valley. This idea doesn't fix a problem that our country actually has, it's going to be run by a person who grows a business with all the discipline of a 6 year old on a sugar high.
The single largest check A16z has cut for a funding round seems to be getting kicked out of other Silicon Valley investors' portfolios. The investor that Eric Newcomer asked if their firm had looked into investing in Flow was not interested in the idea.
The investor said that it was good to know that there was still a place for madness.
Silicon Valley has been awash with money but the innovations it has delivered to consumers have been stagnant. The energy that seemed to be guided by a mission to add productiveness to the world around us has been replaced by greed.
Instead of focusing on the real problems facing the world, some of the best minds of this generation have spent the past two decades figuring out how to get a Pint of Egg Drop soup to me as quickly as possible. This is a time of economic uncertainty and it feels like a waste.
Adam Neumann is the man who best personifies Silicon Valley's supposed mission to help the world. Neumann did a good job at WeWork, according to the man. I don't like that Neumann made WeWork a pop-culture phenomenon, but he never made a dollar in the business, and when it all fell apart he left a trail of jobless, shocked employees and bewildered investors.
Neumann is good at playing the role of the guy with the plan. He walked away with a lot of money after fooling Wall Street and Silicon Valley. I think I can see the appeal of that. He made a lot of money from the WeWork debacle, but anyone who thinks he learned anything from it is crazy.
He is doing a disservice to himself. It seems like Silicon Valley wants to solve real problems and empower truly great founders from all walks of life. Money that could be used to create something productive will be wasted on a branding exercise.
The Y Combinator founder said that A16z couldn't pretend to invest in things that mattered. It's okay that they invest in their friends. We will go somewhere else if you do.
Linette Lopez is a correspondent.
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