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September 25, 2019

Good morning.


The briefly-lived plans for a WeWork IPO surely will be the high-water mark of the current tech bubble. How could anyone have believed this money-losing real estate play was worth $47 billion? The fact that many did is evidence of mass delusion (and perhaps also evidence of the cravenness of investment bankers jockeying for a prize.)


It’s also a testament to the extraordinary charisma of Adam Neumann. Neumann’s business model doesn’t have any of the magical benefits that companies like Uber, AirBnb and Netflix enjoy. There is no special technology, no low marginal costs, no network effects. All it really had was Neumann. But he was literally larger than life—6 foot 5 inches—with an endless exuberance that made powerful people, like Jamie Dimon (his “personal banker”) and Masayoshi Son, want to believe in him.


His wasn’t a real estate company or a technology company. His was a culture company, that was going to “elevate the world’s consciousness” and create a communal utopia rooted in his own upbringing on the kibbutz. Compared to the dour Kalanick or the cerebral Chesky, he was a constant celebration, a self-contained bubble—powered, we now know, by tequila and pot and dreams of trillion dollar wealth, everlasting life, and becoming president of Israel, or the world.


So that raises the question: now that Neumann is no longer at the helm, what’s left? At Uber, Dara Khosrowshahi inherited a two-sided market place that can’t easily be displaced. The new co-CEOs of WeWork, on the other hand, inherit a lot of long-term leases and an army of short-term lessors, who have access to alternatives that are sprouting daily. At the time the IPO was cancelled, talk on the street was the valuation had dropped by two-thirds to $15 billion. But even that estimate may be heroic. Earlier this month, the FT put the number at $3 billion. And with losses of $2 billion a year and a possible recession looming, you might wonder whether it has any positive value at all.


You can read Rey Mashayekhi’s story on the WeWork debacle here. And also this morning, check out this exclusive on Bank of America’s research on ESG Investing. Among the findings: companies with the best ESG scores have beaten the market by up to three percentage points a year over the past five years. Meanwhile, low ESG scores have been a good predictor of impending bankruptcy. More evidence that doing good and doing well often go hand in hand.


Alan Murray
alan.murray@fortune.com
@alansmurray


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TOP NEWS


Impeachment Inquiry


The Democrats have finally opened an official impeachment inquiry into President Trump, with the Ukraine scandal having proved the straw to break the camel's back. House Speaker Nancy Pelosi said Trump's actions to date "have seriously violated the Constitution," and directed six House committees that are already investigating the President to do so "under that umbrella of impeachment inquiry." Wall Street Journal


China Demands


China's foreign minister Wang Yi said the country is opening up to the U.S. and the wider world, just like the U.S. demanded, so the U.S. needs to "do the same to China and remove all unreasonable restrictions." Also, Wang said in New York yesterday, China's efforts "should not be deliberately ignored or denied." CNBC


VW Charges


Volkswagen's CEO and chairman have both been charged in Germany with stock market manipulation, on the basis that they did not tell shareholders soon enough about the financial risks of the diesel emissions scandal. Former CEO Martin Winterkorn also has fresh charges against him, over the same issue. Prosecutors say he fully knew about the situation by May 2015, while chairman Hans Dieter Pötsch and current CEO Herbert Diess were clued up by June and July of that year respectively. The markets were only informed in mid-September. CNN


German Zero


Germany's business lobby has had enough of its government's slavish adherence to the so-called "black zero"—essentially, its balanced budget rule. BDI chief Dieter Kempf said the mantra made sense a decade ago when there was a need for budgetary discipline, but now "the economic boom is coming to an end, the state can borrow at negative interest rates and we have a big investment deficit.” Financial Times



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Content From Deloitte

The Digital Supply Chain


Tech is disrupting most everything, including supply chains. In preparation for Industry 5.0, where people work alongside machines, Deloitte and the Association for Supply Chain Management are creating standards to help companies navigate the digital age. 


Read more


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AROUND THE WATER COOLER


Stop Vaping


Californian health officials have advised vapers to immediately stop using e-cigarettes and other vaping devices, in the context of the still-mysterious spate of illnesses and deaths associated with the technology. That goes for those who vape nicotine and/or THC. L.A. Times


TikTok Censorship


The popular, Chinese-owned social network TikTok censors videos mentioning Tiananmen Square, Tibetan independence and the banned Falun Gong organization, according to leaked moderation guidelines. That means it's exporting Beijing's censorship rules around the world. Guardian


Admissions Scandal


Devin Sloane, an L.A.-based business executive, got four months behind bars for his part in the college admissions scandal. Sloane paid $250,000 to fraudulently get his son into the University of Southern California as a water polo recruit. NBC News


Forest Fires


It's not just the Amazon. Want to get an idea of the scale of the damage being caused by forest fires around the world? Here's a very scary map. Fortune


This edition of CEO Daily was edited by David Meyer. Find previous editions here, and sign up for other Fortune newsletters here.


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