Almost every organization has a face. That face can be more aggressive, such as Ramon S. Ang for San Miguel Corp., or more subtle as Teresita Sy-Coson at SM Investments Corp.
Ideas can also be embodied in a face. “Ronald McDonald” is not only the mascot of the hamburger chain but also of the concept of fast-food restaurants all over the world.
Yet, the power of the face has two sides. From the 14th century comes the German tale of the “Pied Piper of Hamelin” who plays his wondrous flute. His music leads the rats out of the town and ends the diseases transmitted by rodents. However, when he is not paid according to his contract, he then plays his wondrous flute and the town’s children are led away never to be seen again.
We have numerous examples of situations when a smooth talking con artist is able to take the money because people concentrated on the “face” and not on the “deal.” Health technology company, Theranos, was basically a fraud from its inception. But founder Elizabeth Holmes—with her signature black turtleneck sweater—was “recognized for forming the most illustrious board in the United States corporate history” with a $10 billion valuation.
Though not as staggering as Holmes, Elon Musk is in the same
neighborhood. His company’s business model has never been the front and center
of his fund-raising as much as his personality and claims. The average person
identifies electric vehicles with Tesla, yet its business model depends on
government consumer
subsidies that are unsustainable.
Although not a local business news, the investment community has been following the story of “WeWork”—officially The We Co.—for some time. This is a “shared work spaces company” that founder Adam Neumann says, “We think there’s a new way of working in the world, and it’s just better.” He also wants to be the first trillionaire.
Except the shared space business model was first introduced in 1989 by Regus, now publicly listed IWG plc. WeWork in partnership with Megaworld Corp., has less than six Philippine locations. Regus has 23 Philippine locations.
What both companies do is lease large amounts of office space and then rent to smaller users. WeWork has become the third-largest lessee of office space in the world and is near bankruptcy after a failed IPO. The company forgot to mention in its prospectus that without the IPO funds, the company would be insolvent.
From a valuation of more than $45 billion, that has dropped to less than $10 billion, which is sort of high for a company that has consistently seen annual losses grow almost one-for-one with revenue.
WeWork’s footprint of shared office spaces in Hong Kong jumped 700 percent since 2016. With the current political trouble damaging Hong Kong’s economy, a WeWork failure could devastate Hong Kong’s office building market. WeWork is also London’s biggest office building renter.
But Neumann and his investors were not really interested in a business model. As Neumann said in January 2018, “Our valuation and size today are much more based on our energy and spirituality than it is on a multiple of revenue.” Now, imagine one of our Filipino business leaders saying something like that. You can’t.