We Won’t Forget WeWork’s Meltdown

This article is part of the On Tech newsletter. Here is a collection of past columns.

It’s a victory that WeWork has made it this far. This week, a shrunken version of the start-up that rents office space is set to go public about two years after investors saw through WeWork’s hype, the company nearly ran out of cash, and its founder walked away with a fortune.

WeWork is hardly the only high-flying start-up to falter. Federal prosecutors have said that the blood-testing company Theranos fabricated claims that it could conduct hundreds of medical tests using a pinprick of blood, and its founder is now on trial. My colleague Ben Smith raised questions about whether the digital media start-up Ozy overstated the size of its audience.

Young companies like these don’t matter much to the wider world. Their mostly affluent investors can afford to lose money. (Start-up employees who lost their jobs and people who got misleading blood test results fared worse.)

The spectacular rise, fall and (maybe) recovery of WeWork does impose a steep cost, though. Like the banking meltdown more than a decade ago and tales of affluent people using legal means to pay little to no taxes, blundering start-ups contribute to an attitude that the U.S. financial system and economy are rigged to favor the rich and connected.

To be clear: The wealthy and powerful do have a leg up. That doesn’t mean it’s healthy for people to feel fatalistic that it’s just how things work.

“If people feel powerless, then trust in all institutions erodes. That is the tragedy that we have now,” said Anat R. Admati, a finance and economics professor at Stanford University who has studied the effects of the banking meltdown and other corporate crises.

I’m both grateful for and fearful of what young and occasionally brash, overzealous or preposterous start-ups have done in the last decade or so. They have had the ambition and the cash to reimagine old ways of doing things in health care, transportation, education, housing, shopping and other sectors of life.

More than a decade of mania for all things tech has given us both marvels that have made our lives better and a cottage industry of financially unsustainable companies that have sometimes done catastrophic harm and left us to deal with the mess. It’s complicated!

What I’m struck by is the overwhelming stink of unfairness. When start-ups have been successful, they have mostly made the 1 percent even richer. And when start-ups overinflate and implode, the influential people who are responsible for it tend to face little accountability.

The people who are most optimistic about young technology companies have not really reckoned with this unfairness. (One fix they tend to support is loosening regulations to let more people outside the super wealthy invest in start-ups.)

These companies or people are typically not breaking the law. Of the start-ups that I mentioned in this newsletter, only the Theranos founder, Elizabeth Holmes, is facing criminal charges. (She has pleaded not guilty.)

These examples nevertheless leave us with a feeling of unfairness that erodes our trust. We feel it when start-up bosses like WeWork’s Adam Neumann fail and are rewarded anyway, and when rich New Yorkers buy homes on the (relatively) cheap using a law intended to help lower-income families. That stinky feeling seeps through tales of chief executives of mostly unprofitable start-ups who have become some of the most highly paid executives in corporate America.

We can understand how ambition can tempt people into greed or deception, particularly if no one tells them no. The unfairness is not the result of individual bad apples but of systems that are tilted to the rich and powerful, and of watchdogs including government officials being too hands-off or ineffective.

Dr. Admati at Stanford told me that when her students learn more about some of the unfairness of business and financial systems, many of them feel profoundly discouraged. She encourages them to resist that feeling.

She tells them to run for office, press for change inside their future employers, blow the whistle when they see wrongdoing — do anything to fight against the cynicism that America’s financial and economic systems are unfair and that’s just how it is.

Before we go …

• Today’s edition of horrors on the internet: My colleague Dai Wakabayashi reports that an animal rights group sued YouTube for what it said were the website’s repeated failures to enforce its policies against animal abuse videos. It’s a familiar complaint: YouTube and other popular websites remove many dangerous or disturbing posts and videos but also struggle to stop many more.

• Google uses more electricity than the state of Maine. Bloomberg News writes about Google’s plans to run the company entirely on clean energy by 2030. (A subscription may be required.)

• The art museums are on OnlyFans: Vienna’s tourism board has an account on OnlyFans, the site that’s popular with sexually explicit performers, NBC News reports. It sounds silly but there’s a serious reason: The city’s museums have been punished by Facebook, Instagram and TikTok for posting artwork depicting nudity.

Hugs to this

This dog yanking food off the kitchen counter is extremely naughty and wonderful.

We want to hear from you. Tell us what you think of this newsletter and what else you’d like us to explore. You can reach us at [email protected].

If you don’t already get this newsletter in your inbox, please sign up here. You can also read past On Tech columns.