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WeWork and the Evolution of Co-Working Spaces: From Hackers and Activists, to Scrappy Start-Ups, to “Enterprise Clients”

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Photos by Lauren Kallen, via OfficeLovin’

Contrary to appearances, the trend in co-working spaces popping up in major cities all over the world did not begin with tech start-ups, but rather with a “relatively small, scrappy set of independent contractors and do-gooders,” notes Laura Bliss at The Atlantic. “Its history might begin with the European hacker spaces of the 1990s, where independent programmers swapped coding skills in dark basements with an air of techno-anarchism.” The original “co-workers,” in other words, probably included no small number of squatters.

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“Americans caught on a few years later. The first true co-working space, so called, emerged in 2005, renting square footage from a feminist collective in San Francisco’s Mission District.” Enter companies like WeWork to monetize the concept and create what WeWork co-founder Adam Neumann calls a “capitalist kibbutz.” Opening their first location in New York in 2010, the Brooklyn-based start-up has, in the last eight years, come to dominate the co-working world with a business model based on “rent arbitrage,” as a research report from CBInsights puts it, “charging its members more than it has to pay its landlords.”

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How much more? CBInsight relates an anecdote from a 2014 event at which Vornado Realty Trust’s chairman Steven Roth sarcastically remarked, “Adam [Neumann] always says, ‘No schmucks and no assholes, but the definition of a schmuck is someone who rents a property at .5x and then turns around and rents it at 1.5x.’” In reply, Neumann “reportedly held up two fingers, indicating he actually charges members double.” Jokes aside, the strategy has paid off big-time for the company, which was valued last year at $20 billion after raising $760 million in its latest funding round.

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The question investors and market watchers have asked for several years is whether WeWork has been overvalued. Functioning more like a tech-startup than a real estate company, WeWork first crafted its appeal to gig economy workers, an “eclectic mix,” writes Bliss, “of freelance writers, labor organizers, financial consultants, and app developers hustling for investors.” The problem with this approach is that the company’s selling point—creating community for workers choosing, or forced into, contingent labor—is also its greatest weakness, since many of its members lack security and, writes CBInsight, “can pick up and leave if they want to, leaving WeWork on the hook.”

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To hedge risk, the company has begun purchasing properties and targeting more “enterprise clients,” with 30% of its members now fitting that description. In a planned WeWork space coming this fall to Durham, North Carolina, for example, 55,000 of 130,000 square feet of office space will be leased by Duke University. Corporations like Salesforce, HSBC, and Facebook are also major clients. The demographic shift as a whole in co-working has been away from individual contractors and freelancers and toward large firms and small businesses, meaning that the anarchic, freewheeling feel of co-working spaces is beginning to give way to the more organized, workaday feel of the traditional office.

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It makes sense in a certain respect to compare WeWork to a tech company. They achieve “maximum efficiency” in part through the use of machine learning. “To decide how many meeting rooms to construct” in each location, “researchers at WeWork created a neural net that collects information on its existing building’s layouts and meeting room usage.” This enables them to make predictions about usage for layouts yet to be built. And each of their spaces is unique. As you can see you can in the photos here from its quirky, homey Long Beach offices, WeWork spaces include such welcoming accommodations as a secluded “Mothers Room” (above) and a “Phone Booth” (below) that can be sealed off from the hubbub with a glass door.

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What is it like to work in WeWork spaces? Bliss shares many positive impressions from members, but also notes the degree of overt corporate capitalism evident in the “capitalist kibbutz”:

Members are encouraged to mingle, network, and leverage one another’s talents, frequently under the auspices of a corporate sponsor: Witness taco pop-ups promoting internet phone service; talk-therapy circles sponsored by a women’s activewear brand; cocktails served up by the payroll-software giant ADP. Billed as community-building programming, the events can feel more like exercises in targeted advertising, with members as the marks. 

The net effect, she writes, “can feel like an all-inclusive cruise.” And when it comes to getting work done, “cruises, of course, aren’t for everyone.” Additionally, WeWork has sold its enterprise clients on productivity schemes that involve monitoring employees with “data-harvesting sensors and facial-recognition software.” WeWork promises this data will not be used to track individual employees. Such promises should be taken with the appropriate amount of skepticism given many other companies’ carelessness or misuse of such tracking data.

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In any case, it remains to be seen whether an aggressively corporate version of the improvised spaces once created by anti-corporate activists and hackers will have long-term success. But for now, WeWork is thriving, expanding into smaller cities in the U.S. like Durham, and across Asia with WeWork Japan, WeWork Pacific, and WeWork China. The company, notes Forbes, is “now worth about the same as hotel operator Hilton Worldwide and more than commercial real estate giant Boston Properties.”

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Do their offices encourage more partying and promotion than productivity? Or more marketing than creativity and innovation? Or more surveillance than office freedom? Have they “humanized” work, as they promise, or created trendy, expensive rental digs for more of the same? It’s hard to say. Bliss concludes with some incisive observations about WeWork and the direction of the co-working model more generally: “A future where co-working is made entirely of big fish and little fish content to swim in one transactional bowl is a future that seems to leave out a lot of other fish: the vegan-meal-kit makers, the community bail fund, and hey, the journalists. We, too, are working here.”

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