The United States is in the midst of a housing crisis. Renters and would-be homeowners across the country are facing spiking rental prices and increasingly steep barriers to entry, respectively. Whether or not any significant majority agrees on, for example, the question of Do I want new stuff in my metaphorical backyard?, plenty of solutions have been offered. We could build more of those cookie-cutter five-over-one condos, or use the law to curtail the power of landlords. But, until recently, no one has been bold enough to “rethink the housing rental market by creating a branded product with consistent service and community features.” Wow! Finally, an idea worth throwing $350 million at!
That big idea-haver is Adam Neumann, the small forward-sized, semi-disgraced founder of WeWork, and the check-cutter is premiere Silicon Valley venture capital firm Andreessen-Horowitz. It’s somewhat shocking that anyone gave Neumann another bag given what happened the last time he helmed a sizable, nebulous real estate-style company; it is even more confounding that a firm as well-regarded as Andreessen-Horowitz cut Neumann the biggest check in its history, with co-founder Marc Andreessen penning an embarrassing blog post to announce the deal last Monday; and it is especially puzzling that the nebulous real estate-style company at the center of this deal, Flow, does not really exist and that nobody involved can say much about what it will do. It seems safe to say that one thing it will certainly not do is alleviate any of the symptoms of the housing crisis, which is being cynically invoked by the players involved here as rhetorical cover for what is either at best a hilarious grift—Silicon Valley grandiosely reinventing “being a landlord” in the way that it periodically re-invents, say, “a bus”—or at worst a pretty grim project.
To anyone who has ever even been inside an office building, the business model of WeWork—rent large chunks of office space and sublet it out—was simple enough to understand. Neumann was able to convince SoftBank (last seen reporting Q2 losses of $23 billion) to give him a total of $17 billion over the course of nearly a decade (the company is worth roughly one-fifth of that now) by making the case that his commercial real estate business was in fact something much more like a software company, and so capable of generating software-company returns; to do so, he spun renting out desks and giving computer-type workers access to, I dunno, a seltzer fridge or something, as the technologically driven work of a “community company committed to maximum global impact” whose “mission is to elevate the world’s consciousness.” I suppose renting out office space at post-Great Recession prices and then subletting it at a higher rate is less sexy, and you also can’t make the case that doing so marks a transformative moment in the evolution of human potential. So Neumann just went with the messianic stuff, and it worked until it didn’t.
WeWork infamously tried and failed to go public in 2019. Once actual investors, and not the guy who told Neumann “in a fight, being crazy is better than being smart,” got to peek under the hood and see exactly how inflated WeWork’s $47 billion valuation was, the whole thing collapsed. The public learned that Neumann was quite the erratic leader, prone to walking around barefoot in New York City, splurging on big-money acts for raucous corporate retreats, getting deep into a bunch of expensive life-extension psuedoscience, and once laying off seven percent of WeWork employees before bringing out a member of Run DMC to perform “Tricky” while each employee was furnished with a tequila shot. Neumann, who once bragged about his line ruling WeWork as a 300-year hereditary imperium, was out as CEO, with an astonishing 10-figure golden parachute. He escaped with an ungodly amount of money as his business burnt to a crisp. Jared Leto would later play him in a streaming series about all this.
That’s the guy who’s now getting more money to do another big-time real estate thing. So why would Andreessen-Horowitz cut him another big check? This is not even the first time Andreessen-Horowitz has funded an Adam Neumann venture this year. In May, they led a $70 million funding round for Neumann’s stupid crypto project Flowcarbon, “which operates at the intersection of carbon and new technology to protect the earth’s natural carbon sinks and scale quality carbon reduction and removal projects.” If you understand what those words mean and think that sounds cool, I have some bad news for you: the project was “paused indefinitely” last month.
Since minting a billion dollars from investing in some of the biggest companies in Silicon valley, Marc Andreessen has become something of a housing guy, which may explain why he’s bet big on Flow. His public-facing persona is someone determined to help alleviate the woes of the Bay Area’s punishing housing market, chiefly by advocating for the construction of more homes. That posture predictably clashes with his actual conduct, as the Atlantic reported earlier this month on a histrionic, all-caps-laden public comment (Subject line: IMMENSELY AGAINST multifamily development!) that Andreessen and his wife gave against Atherton, CA (home of the country’s most expensive zip code) building more housing. That hilarious disjunction is a good frame for the way Andreessen himself attempts to spin as a bold move for the public good his fund’s considerable investment in the new company founded by the guy who is most famous for gutting his old company:
In a world where limited access to home ownership continues to be a driving force behind inequality and anxiety, giving renters a sense of security, community, and genuine ownership has transformative power for our society. When you care for people at their home and provide them with a sense of physical and financial security, you empower them to do more and build things. Solving this problem is key to increasing opportunity for everyone.A16Z
What does that mean?
Make no mistake, this kind of mission is a heavy lift. Only through a seismic shift in the way industry relationships are structured and the mechanisms through which value is delivered can we hope to address the underlying problems of the current system and build the solution. Doing this requires combining community-driven, experience-centric service with the latest technology in a way that has never been done before to create a system where renters receive the benefits of owners. This means rethinking the entire value chain, from the way buildings are purchased and owned to the way residents interact with their buildings to the way value is distributed among stakeholders. And given the fragmented nature of the ecosystem today, we can only hope to accomplish any of this by bringing every aspect of the living experience together.A16Z
There are a number of red flags here—”stakeholders,” “value chain,” “living experience”—yet almost no details on what Flow will actually do—not just to achieve the goal of reinventing housing, but “do” in general. The company’s website has nine words, so that’s not very helpful either. The closest the statement gets to actually spelling out what Flow might do is the phrase “community-driven, experience-centric service,” which is so jargon-rich as to be completely undigestible; what would, or could, an experience-centric version of “living in a place” be like? The only real insight into what Flow will do comes from a company called Alfred, a company in which Neumann was a big-time investor; he still owns 10 percent of it. Alfred raised a bunch of money this Spring, though it did so under terms that curtailed Neumann’s control over the company. So, according to a Forbes report, Neumann simply started Flow as a more-or-less direct competitor with Alfred, swiping several board members and buying another Alfred competitor and hiring its founder to work for Flow.
But if the idea for Flow is unoriginal, it’s also pretty inane. As far as I can tell, the innovation at work is some combination of making software that can manage properties, doing the WeWork move of parceling out a large chunk of space into smaller ones (read: reinventing the condominium), and providing an “app-based concierge for the millennial set.” If one ignores Occam’s Razor and presumes that the end result of all this money sloshing in Neumann’s direction will be something more than another house with a guitar-shaped room for Neumann and another company left smoldering as he pads away barefoot, all we have here at the moment is 1) a rebranding of something that already exists with 2) a tool for landlords. Nothing about it is new, exactly, and even the 2012-ass move of throwing hundreds of millions of dollars at a shinier version of an extant idea would feel dated even if Literally Adam Neumann wasn’t on the other end of things. As is often the case with big-ticket Silicon Valley investments, there’s something deranging about it all when considered together—the massive sums of money thrown at these small and sketchy ideas, the casual smugness or smug casualness of the underlying grandiosity behind it, the blaring mediocrity of the supposed visionaries involved.
The tech sector has endured a rough 2022 as many Silicon Valley darlings, like Meta, have proven unable to do anything besides pursue a monopoly and mostly fail. It may be that real estate can be thinkified in a more efficient way with software or whatever, though the question remains: for whose benefit? For all the rhetoric about changing the housing equation for the benefits of renters, nothing about the (again, extremely fuzzy) model of Flow suggests that it will or could be anything other than a tool for landlords, with some vague handwaving towards web3. One hopes this will simply all “flow” towards the toilet of history, along with everything else Neumann has ever founded. He’ll probably be fine.