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Circle of Competence Issue #81


"The four most expensive words in the English language are 'this time it's different.'" - Sir John Templeton


WeWork chases new financing as cash crunch looms (Financial Times)

I hate to beat a dead horse, but sometimes its just plain fun. I've written extensively on WeWork in issues #72, #75, #78, and #79. In late July I wrote of WeWork's business:

"I simply can't understand the massive multi-billion dollar valuation (on-paper) assigned to essentially a real estate leasing company that *used* to be capital-light when it was *only* subleasing office buildings on a short term basis but then *pivoted* into actually *owning* the buildings. Isn't it morphing into an actual real estate company? They trade for far lower multiples than WeWork. Community adjusted EBITDA? Hmm. The CEO owns buildings that are being leased back to the company? Fishy. The CEO is cashing out almost three quarters of a billion dollars prior to the IPO? Huge red flag. Competitors are beginning to emerge in other markets? The bells are tolling."

The absurdity of crowds shows itself in wonderful ways, and this is one fantastic case study that just keeps giving. I've been doing some research lately on WeWork competitors (Regus, Spaces, Industrious), and it turns out that this business model is actually feasible with 1) less leverage, 2) a steadier path of growth (more akin to the RE industry and not the tech industry), and 3) a more experienced executive suite. But with Masa Son's Vision fund backing WeWork, there was little room for 1 and 2, and with Adam Neumann at the helm, well...' The Messy Marketplace in podcast form (

I've been listening to this book in podcast form the entire week and it is an MBA crash course on purchasing small private businesses. For those selling a business, I'd love to introduce you to the team at full disclosure, they are great people and love to partner with family-owned businesses, and I'm a big fan of their permanent capital model as an alternative to traditional private equity. For those considering purchasing a small business, this is an incredible resource that can serve as a one-stop guide to a transaction.



The population bust: demographic decline and the end of capitalism as we know it (Foreign Affairs h/t Brandon Trama)

Three big things: the most important forces shaping our world today (Morgan Housel)


Housing and the Chinese middle class (Andrew Batson h/t Brandon Trama)

The China cultural clash (Ben Thompson)

With the US and China, two types of capitalism are competing (Pro Market)


Steve Schwarzman on the key flaw in the PE job loss study (PitchBook)

1986 profile of Warren Buffett and his investing in Capital Cities (American Radio History)

IPO lessons for public market investors (Aswath Damodaran)


Lessons on Germany's energiewende (Scott Nyquist)

Is Amazon unstoppable? (The New Yorker)

How remote work is quietly remaking our lives (Recode)

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