The Power of Scaling and Flexibility

Burton Goldfield: Good morning and thank you all for joining us. Sandeep, welcome to PeopleForce.

Sandeep Mathrani: Thank you.

Burton: It’s so great to talk to you. I’m going to start simple. For those folks who have been under a rock for the last five or 10 years, what is WeWork?

Sandeep: Then you’ve really been under a rock. WeWork is a coworking flexible space provider. It actually got started in 2010 coming out of the Great Recession. And the purpose of it was to create great environments to promote collaboration, innovation for small businesses. And most small businesses, if they want to get into locations that are prime, it’s very hard to get in because clients don’t give small spaces to small clients. And so, we were able to create spaces for them. If you want to be at Rockefeller Center, you want that address, you could come into co-working. But it was really meant, if you think about it today, we also to sit back and say, “Oh, we need to go to work for a purpose.” But it was really created for that almost 12 years ago.

Burton: Right. So we are a larger company. I am a big fan of the model. We use it all over the country. Do other larger companies use WeWork as well?

Sandeep: Yes. About 60% of the S&P 500 companies use us. So almost half my business comprises of enterprise clients. Your sales, Amazon, Google, Netflix. We just opened a headquarters of a company in Paris called Qonto. It’s a fintech company. We did their corporate headquarters. Currys, which is a FTSE 100 company, they relocated their corporate headquarters into a WeWork because they wanted the vibe, they wanted the environment, they took advantage of all our products to have a holistic environment. So we do this quite a bit, even in the United States, in New York City where we’re sitting. Palantir, a big technology company, their New York office or headquarters is in a WeWork. So there are many corporations who actually have the headquarters. Burton, you need to move your headquarters into a WeWork.

Burton: Aha. Exactly. So take me back two and a half years. You join WeWork after a delayed IPO, a fairly difficult economy, a visible exit of many of the management team. What the heck were you thinking?

Sandeep: Good question. I wish I was on the beach. I would sort of sit back and say that if I sort of rewound my life, I won’t take you all the way back, but my first real estate job, I started very quickly doing restructuring loans. I learned it in ‘91, ‘92. The best time to learn a business is in a down market, right? Everyone looks good in an up market, right? And then I sort of progressed into doing a startup in Brooklyn, actually, actually where you’re sitting, almost all the buildings around here in MetroTech were built by Bruce Ratner and myself. So we created downtown Brooklyn really. That was a startup and then I did another turnaround.

And it wasn’t till 2010 when I read my name in the newspaper as one of five CEOs to take over a company called General Growth Properties, which was a very large shopping center company. And I said, “Oh, I’m being called because I guess I do turnarounds.” But I had no idea until that stage because I was just doing my job. Someone would say, “Come and do this,” you did it. And so I think I sort of enjoyed trouble, for lack of a better word, and I didn’t really innovate. GGP was an amazing turnaround. And actually, I was about to take some time off and I live in Miami and I thought I would just take some time off and sit by the beach.

But a few months prior to that, when the IPO failed, as you mentioned, and I only mentioned this, I put it out there that, “Wouldn’t it be fun to be CEO of WeWork?” I don’t know what I was thinking then either. But you put stuff out into the world and you never know what happens, right?

Burton: Right.

Sandeep: And lo and behold, 60 days later I’m CEO of WeWork. So I took the job really because, or even thought of it, because no matter whether the press is good, the press is bad.,This company was always in the news. This company built an amazing brand to disrupt commercial office. And WeWork is like Uber, it’s like Amex, it’s like Xerox. It’s sort of synonymous with co-working, flexible offers, great design, great community people. And I said, “How cool would it be to take over a brand and turn it around?” So to me, it was actually intentional to take this on because I thought it would be a great way to head into retirement if I could turn this business around.

**Burton:**So a lot of the entrepreneurs listening today have faced challenges. What is the biggest challenge you faced first and how did you address it?

**Sandeep:**So multiple, because also appreciate, I joined February 18th, 2020 and March 14th, 2020, we went into a pandemic and a shutdown. So I would say the first few, obviously for those three or four weeks, we had no idea that COVID would be what COVID turned out to be. But the first thing you had to do is you had to build back the culture of the organization, the spirit of the people. You have to understand that this company had this rapid meteoric rise. They were meant to go public in this highly publicized IPO, which didn’t work out. And they were all deflated. And now this company was out of money, didn’t know what the future was like. The founder was no longer part of the company. They had these co-CEOs who I replaced. And so there was a lot of unease in the organization. How do you stabilize it, right?

And so, the first thing you should do is communicate extensively, lay out your plan, build back the culture. I’m a big believer that culture eats strategy for breakfast, in the words of Peter Drucker. And so we went about coming up with our core values, coming up with what they mean. How do you translate that every day? I was very transparent. I learned this at GGP, lay out your plan. Don’t be afraid, just lay it out, but give people a deadline. And everyone knew there was going to be massive layoffs and everyone knew there was going to be a streamlining of the organization. And they don’t mind that as long as you tell them, “It’s going to be over on this day.” And then they feel okay, you’ve laid it out for them. You’ve been very honest. And we laid it out, we gave a timeline and we stuck by it. So we did and we built back the culture of the organization. We over-communicated. All about people at the end of the day.

Burton: Right, right. And how does trust play into that? They had to trust you taking a very different direction, a different cultural environment. How did you build that trust?

Sandeep: I think I was a little fortunate. I think when you get to be as old as me, I think, I just turned 60, so I’m having these flashes of being old. But I will say that if you’ve had a career and built, I would say, I don’t want to say a good reputation with the employee base, with companies, with leaders. And so a lot of people did enough research on you. So they were actually very happy to have an, I say an adult in the room. They were happy that maybe there’s an opportunity to turn this company around. And you have to understand the colleagues at WeWork love WeWork. I mean they breathe it, they live it, they want to see it be great. So I think I got to buy, okay? And actually, the bigger issue is, okay, you gotta buy. All I had to do was not screw it up.

Burton: Interesting.

Sandeep: That’s the flip of it, right?

Burton: Yep.

Sandeep: And I did get a buy. They wanted to trust you, day one. And they did and they followed exactly the way we laid out the plan.

Burton: Let’s turn to the environment that changed over the last couple years. And I am particularly interested in, we’re seeing remote work, does that help the WeWork story? Hurt the WeWork story? Or is it completely orthogonal to the WeWork story?

**Sandeep: **We were actually made for a post-pandemic environment. That’s just the irony. The irony is we were made, as I said, in 2010, to create collaboration, to create innovation, to create productivity, to create a community, to give people a purpose to come in. So that’s why we were created. And maybe those were all fluffy words, pre-pandemic, because I said, okay, that sounds really good. You’re building a community, you’re building a culture, you’ve got these great spaces, you have this great hospitality. But reality is on a post-pandemic environment, it’s exactly what people want. People want a purpose to come in, they want a turnkey solution. They don’t want to put capital, they don’t know what their needs are 18 months of today, they know what their needs are today.

So actually we were made for a post-pandemic environment where the name of the game is flexibility. And the name of the game is what’s the purpose? Why am I coming in? Who am I going to sit next to? If I’m going to come in and be a zombie and look at a screen, I might as well do that from my house. So what we find is we’ve created this really nice environment and effectively people want to come in to meet other people. I was actually talking to a CEO for of a company today, Klarna’s, Sebastian, earlier today. And I visited him a couple of weeks ago in Stockholm and they have about a 10% attendance rate. And I said, “Would you like to walk to the WeWork?” Which is really around the corner. And he walked in there and said, “Are you serious? This place is packed.” And I said, “Yeah, people want to see other people. They want to communicate, they enjoy this.” And we’ve created that reason to come in.

I was looking at some statistics on the way in. Last week, compared to a year ago, the card swipes were up 77%. And so for WeWork, interestingly enough, in the international markets, our traffic is back to pre-pandemic levels. And in the U.S., we’re probably now about 80% of pre-pandemic levels. So we were created for this environment and that’s created the boom.

Burton: You and I have talked before about creativity and the hall conversations and the environment that WeWork has is excellent for that. And people come in for purposeful reasons to do things and communicate. And then they can also have a hybrid work environment with the WeWork environment. And I find that people are thrilled to get back together, the energy level is up and the creativity is back. How do you think about creativity and interaction face to face?

Sandeep: Well, look, you can only quote the leaders in the business, whether you like him or hate him, Elon Musk, you could have any opinion you want. But he actually said, “You can’t make cars on Zoom.” When you look at Apple, essentially said, “Our productivity and creativity is down. We really need our teams in three days a week.” And so I think it’s very hard and I think it’s a lot more effort to do things remotely. Unless you do quiet work, which is if you’re an engineer, you are programming, you don’t need to speak to anyone. Sure, you could do that from anywhere. But most of us are collaborating with other people and it’s much faster.

And people always ask me a question, “so why was productivity up in the initial stage of the pandemic?” And my reason’s pretty straightforward. We work 14, 15 hours a day to do an eight-hour job because we were afraid of our jobs. We didn’t know what the hell was going to go on. We knew it was taking longer, but we had to get the job done. It’s not sustainable to work 14 hours a day for two and a half years. So then the labor markets got tight and effectively people started work from home. And admittedly nothing wrong with it, they went back to working eight, nine hours a day. And they were working those eight, nine hours a day. So let me not just solicit back and say they were not working eight and nine. But every Zoom call is a half hour. It may be a five-minute call, but you’ve reserved a half hour. So it’s unfortunate that it took away from the efficiency because we had to schedule half an hour calls.

And most people were programmed morning to night. And it wasn’t impulsive, just pick up the phone and call someone or walk into someone’s office and say something or have a water cooler conversation. So I think it’s really hard. I do believe there should be hybrid work. I do believe there’s time to have time away. I do believe that commuting is an issue. I acknowledge all those situations. And so I think it’s a format that’ll work. But look, David Solomon of Goldman Sachs, you think he’s asking people to come in five days a week because for the fun of it all?

Burton: Right.

Sandeep: He’s seeing something, right? He’s seeing that, “Hey, I’m not productive or my people are not productive,” whatever he’s seeing to make them come in, he’s actually making that point to come in five days a week. And then the company made a lot of money and they announced layoffs yesterday. So, what are they seeing? And we should just acknowledge these are leaders in the business.

Burton: Right, right. And as a CEO, I’m examining costs all the time, particularly the difference between fixed costs and variable costs. And one of the reasons why we have shrunk our footprint and gone to WeWork is because I’ve look at it as a variable cost model. I can bring the value more locally, because people aren’t going to drive two hours to a regional office. And it’s just much more utilitarian. And I feel much more comfortable having less invested in real estate, because you’re doing the investment.

Sandeep: You could actually take it one step further. Again, I talk to a lot of CEOs, and effectively in talking to the CEOs, they realize that what people normally do is they plan for full employment. So said differently, if I knew that in two years, I’m a small business, I was going to have 100 persons in my company, I will take a location for 100 people. It may take me 18 months to hire 100 people. So essentially what we call it is dark rent. So people are paying, if you actually look at it on a head basis, they’re paying a lot of money because of the ramp up time. What we allow people to do is you start where you start. You start with a one-person office, a two-person office, a 10-person office, and you graduate to your needs, okay?

Burton: Correct. Yep.

Sandeep: You mix my all-access product and you sit back and say, “Okay, I’m going to give some employees an all-access product.” So they peel into my common area, they sit in the center of gravity. So our job really is to optimize your real estate cost so that it would be efficient and actually be less expensive per head.

And so, we allow people to grow at their pace, okay? No one had this concept before, therefore you had to have the ability to plan for 18 to 24 months out. Now that exists, so you should use it. And then we don’t know what the utilization rate will be. I have 10 employees, should I get a four-person office? Will all 10 people come in? And if they do come in, where do they sit? Can I rent a conference room by the hour? Can I rent an office by the hour? Can I sit in the common area? So we make it highly efficient for people and people love it. And as companies are understanding the value proposition, they’re peeling off. I mean, like I said, this morning’s conversation, the person said, “Hey, can you just manage my office? Can you take half my office and lease it to a third party? I’m not using it.” Because they realized that what they had committed to was not really how things panned out post-pandemic.

Burton: Yep. Over the last two years, what is your biggest learning and have you had to pivot off of something that you believed was an assumption that either wasn’t true or wasn’t on the mark for the next milestone for WeWork?

Sandeep: I’ll say two things. One, I will say on a personal level, you have to over communicate in a pandemic to your employee base. And as we come out of the pandemic, we truly over communicate. I send a note out every Friday to the entire company, talks a little bit about work, a little bit about personal life, a little about our core values and you try to connect. So one, I didn’t really appreciate how important it is to over communicate and the pandemic taught me that. And as we stay out of it now, it’s again taught me, as I travel the world and meet my colleagues, they say, “We look forward to your Friday note.” So we don’t appreciate how important it is to over communicate.

The second thing on a work basis, what we did was we did two new things. We keep talking about our spaces, people coming in, but we launched this All Access card, a membership model, which I think is the coolest thing ever because essentially you pay $225 bucks or $230 bucks and you can access 800 locations globally. I mean, as I joke, it’s $10 a day and a cup of coffee costs $7 at Starbucks, and our coffee’s free. So you can come the whole day. And people have really adopted, 70% of our all access members are small, medium businesses who now realize, “Hey, I can go for $225 bucks. I don’t have to spend $500, $600 on a desk. And I can go when I want. If I’m downtown, I can go downtown. If I’m midtown, I can go midtown.” So that’s turned out to be amazing. And big companies are combining all access with their space and service for efficiency.

And then we just launched a software product for workplace management, which again, we’re trying to give people a reason why they should come in. So if I know that Burton’s coming in and he’s sitting in this location, I’m going to say, I want to book a desk right next to him because today I want to hear what he’s going to say. I just want to feed off his energy. Not that I really have much to talk to him about, but I just want to feed off it. And so we are giving people a purpose for coming in and saying, “Okay, I want to collaborate with this person. I want to talk to this person.” Then it gives you a reason versus just coming in and sitting at your desk and you say, “I don’t even know the person next to me. I don’t even want to talk to the person next to me.” So open-plan offices and the ability to move your location is becoming really important.

So both all access and workplace management, I don’t think we would’ve launched if it wasn’t for the pandemic. And it did create a pivot for us because our original plan was just to completely increase the number of desks we would own. And we don’t have to do that anymore.

Burton: Right. I’m an All Access pass member. I use it all the time. What other things do you think change in the next five years in the co-working space? Where is this going and what is WeWork’s position in it?

Sandeep: Look, as I always said to people, that you’ve got to walk in chew gum at the same time. While you’re running your regular business, you have to continuously innovate because if you don’t innovate, you’ll become obsolete. And even in this modern day, if you think about it, where’s Motorola? Where’s Nokia? And we all use our smartphones 24/7 and they became obsolete and went away. So I do believe we have to continuously innovate the space. We have to continuously give people a reason, a purpose to come in. So besides the spaces, we have to really do true events, which people don’t fully appreciate it. And what’s ironic, and as I was telling these large enterprise clients, I said, “When we do our events, and effectively we always thought the events was really for socialization and bringing people together of small medium businesses.” And the biggest attendance of these big events are the enterprise customers.

Burton: Enterprise customers, getting access.

Sandeep: So we talk about, again, I’ve been floating this out a little bit… I have no data to support my next comment. And it’s okay because at times you have a thought and you see where that thought takes you. I think this aspect of corporate campuses is a thing of the past. And people have built these beautiful, massive campuses, but I do think it’s the thing of the past. And the reason I think it’s a thing of the past is people come to meet other people and they don’t necessarily need to meet people from the same company. Because how are you going to meet other people? Look, a lot of people find their spouses, partners at work. And since it’s not so kosher to do that anymore, so how do you do it? And people forget that. Okay, you want to make friends, you’re in a new environment.

And so what I do think is going to start happening is these large corporate campuses, which are, if you think about monolithic structures, obviously everyone looks the same. If you remember the days of IBM, where people used to wear a blue suit and a white shirt and that was a uniform. Every person who went to IBM dressed like that, right? And they don’t want that anymore. They don’t want to see same. They don’t look in the mirror and see the same person. So my prediction is that, besides this whole aspect of giving it a purpose to go to work, that you also want to create an environment where people want to go. Why are people going to restaurants? Why are restaurants full? Why are movie theaters now getting full? Broadway plays are full. You go to a rock concert, it’s full. Why is the office empty?

Burton: It’s a good point. So you have seen growth in the desks. Do you see that continuing? Is there a trend going on in your mind for WeWork over the next couple years?

Sandeep: I mean again, I’m very singularly focused. As we were chatting on the walkup here, look, I took it over at the pandemic, revenues declined. Now for the last 15, 16 months, revenues have been climbing very nicely. Year over year, our growth is 30% plus. So I’m very singularly focused to get profitable by the end of this year and very singularly focused on building my All Access and my software business. I’m really not looking at growth until 2024.

Again, maybe this is applicable to small businesses, many small businesses start off, they all have expenses. They obviously all lose money for a period of time. And then sometimes people feel that you keep spending money and then revenues will eventually take over from the expenses. But I think that was the Amazon way, but it’s in the sense that Amazon did that for many years and they were able to accomplish that. But I think you have to, at some states, sit back and say being cashflow positive, being profitable is important. So for me, we’ve built up great brand. We have a nice scale. We’re a global scale. We will be the largest revenue company in the world by the end of this year for our business. And so for me to get profitable and to be cashflow positive are two important things. So, I don’t look for growth till 2024. I’m looking only in the next 15 months.

Burton: Well, you know I’m a big fan of yours. I have a great fascination because you took on this big challenge and at a much larger scale than many of the businesses I deal with every day. You are focused on delivering the result. You know exactly where the company is going and you have a vision for it. So it’s so much fun talking to you about this because you took on the challenge eyes wide open. Now maybe not the pandemic, but pandemic was an extra little punch in the gut for the last few years.

Sandeep: I’ll tell you a funny story. When I took this job, I said this is going to be the easiest turnaround. You know why I said that? This company had one beautiful thing, had always had growing demand and growing revenue. So it was very hard to grow a business that has declining demand and declining revenue. Okay? Believe me, I just turned around a mall company before that—and at the time when bricks and mortar was having a hard time and e-commerce was climbing. So this one, I said, okay, I don’t have to deal with that. This is much easier. I just have to deal with an upside down cost structure. And then COVID hit. It’s been hard.

Burton: So the audience is sending some questions in. I’ll give you a question that’s very relevant to what you just said. And the question is about have you mastered the design and ambiance within these offices? Do you see that being a big part of the attractor to get people to commune with each other, talk to each other? Or is that more just sort of a facilitator?

Sandeep: No, I think you need an environment. You need to create the right design. And I will say that I don’t know how, but WeWork has that sort of special sauce. I don’t know, the designers drink a different set of water. They do something. And I say, oh, why do I say that? I remember when I moved my corporate headquarters in Chicago for GGP, I told the designers, “Design a WeWork.” Okay?

Burton: Okay.

Sandeep: And of course I got my own hands in it and it was corporate office. It was not a WeWork. It was good, but it wasn’t a WeWork. And it taught me something, that this company does something because its entire DNA is the people. We call the people who receive you when you come in our community people. And they’re all from the hospitality industry. So we pay more for them. We cater to that hospitality service and we create the center of gravity. And I always ask people, “What’s the most important place in a hotel? Do you sit in your room the whole day?”

Burton: No.

Sandeep: You sit in the lobby, to be seen or to see people. You sit in the bar. Okay? So why do you do that? Why are you out of your space? Because that’s what people like. They like other people. So the same concept applies here. You need to create a center of gravity that creates the buzz. Okay? People want it. And that comes from design. Because every office in its interior is pretty blah, right? So design is very important, but so is the people. Okay? If you come in and you get a great vibe from the moment you walk in, you feel good. When the person says, “Good morning, Mr. Burton,” you say, “Oh, I feel good when I come in.”

So I think design is very relevant, but also you need to create a collaboration hubs. They feel different, they should look different. Someone said this to me cleverly, they said, “Okay, you know how we’re designing our spaces?” I said, “How?” “So, we’re trying to bring the home into the office,” which I thought was clever, you have couches and be able to lounge if you want lounge and do what you need to do. And I said, “But WeWork’s been doing this all along.” And it increased that environment. So design’s very important.

Burton: And has COVID changed your design at all?

Sandeep: You’ve taken away more conference rooms and made them more collaboration hubs. So you have whiteboards, you have couches, you have places to go sit if you want to sit. And think about your home, you move around, right? And it was very easy for us because we are generally non rigid in our…

Burton: You can evolve these spaces over time.

Sandeep: …correct.

Burton: So there’s a question on the monitor about reputation and brand. How have you turned around the reputation and brand of WeWork?

Sandeep: Look, I will say that it’s, maybe I should give a shout-out, my CMO and chief communication officer somewhere in the crowd, her name is Lauren Fritts. I give her actually all the credit for dealing with the press and turning around the reputation of this company. It was not an easy job.

But I will say the following, WeWork was an amazing brand. Look, I’m going to give the founder credit for many things. He created a brand. He created a product. He created a community. You can’t take that away from anyone. And nothing wrong, sometimes you have an upside-down cost structure. And so the brand, interestingly enough, was not tarnished with all the stuff that went on in the press. The members didn’t worry about it too much. Of course, the investors may worry about it. And so what we had to do was take away from the press the negative jargon. And the way you do that is again, being honest and transparent with them. If they know you’re honest, you’re transparent, you’re trying to do the right thing. You tell them the story, you pre-warn them, you bring them along for the ride with you. And you’ve built your own personal reputation. It takes time, but you have to work it.

And look, I mean, Lauren and the team did an amazing job. And I remember telling her when I first joined, I said, “I will never do an interview. I’ll never be in the press.” And she laughed and she said, “You don’t know who WeWork is, okay? We’re going to be in the press every day.” And I said, “No, we’re never going to be in the press. I will never do this.” Because my reputation was always to be quiet, to be below the radar screen and it wasn’t meant to be. Yeah. And then you learn that you have to be honest and transparent. And I’ve been that way with them. And look, we’ve taken a lot of naysayers and made them yaysayers.

Burton: Yes, you have.

Sandeep: I mean this last quarter we produced results. There wasn’t one newspaper that had anything negative to say. So it takes a lot of effort, but you have to be transparent. And I think the best is going to be obviously once you’re profitable and you’ve taken available naysayers. But you’ve got to take them along the ride and be honest with them.

Burton: I remember our first meeting, we talked a little bit about this reputation and you said, “I’m going to set realistic goals and I’m going to beat them every single time.” When I asked you about it and you told me, “And the rest will come along behind it.” And I think it’s a great lesson for the entrepreneurs out there. You can have a stretch goal, but you need a set of goals that are the bedrock and foundation of your business. And that’s what I was impressed by. You just looked at me and said, “I’m going to meet these goals.” And you have all the way along.

Sandeep: But I also said something to you, “I’m sorry that we were not good partners originally.”

Burton: Oh well, that...

Sandeep: No, but it’s true. It’s an important lesson I think people have to appreciate. Many times I will say, talk about WeWork and the reputation. So literally maybe the first year, every call I had with an enterprise client, I started off by saying, “I’m sorry…

Burton: ... You’ve told me that, yeah.

Sandeep: ... “I’m certain we did something to offend you.” And what happened? The guard just came down, instantaneously. Because I had been to so many of these calls and we had done something. And once you take the guard down, you listen to them, you essentially figure out what’s wrong and then you cater to them and you solve the problem, they never forget. And then by the way, things happen. Bad things happen. I mean, there’s leaks. Stuff happens, but you have to solve it. And in the same way, if you think of our relationship, we had a very good relationship. It went off kilter. You and I put it back together. It proves that you can actually do it if you’re transparent, you’re honest, you apologize and you’re sincere. And it didn’t happen overnight, it took a year, but it happened. And I think that’s great.

Burton: And it comes down to trust.

Sandeep: 100%

Burton: It comes down to trust. And that’s what I try to convey to people is that your reputation is all you have and it lasts with you a very long time. And it’s been absolutely wonderful. So the next question from the audience, and you touched on this, that people have a strong preference to work from home. I don’t, but some people do. And how do you think this shifting preference works in the WeWork environment?

Sandeep: Look, I mean, again, leave aside how I am running WeWork and what I tell my WeWork employees for a second. But effectively we are perfectly suited for exactly people who want to come in, in a flexible manner, right? So we actually are completely… So if you are a small, medium business or an enterprise client, you have 50 employees, you may take space for 10 people and then you may take an All Access card for 40 people or whatever the combination is. And then if more people come in, they spill out into the common area. So essentially from a business model perspective, we are perfectly suited for this hybrid work environment.

And like I said, the aspect of working from home is an interesting phenomenon. Okay? This is the biggest experiment that we’re going to have. It’s been tried before. I mean, Larry Fink, I’m only going to call more important people than both of us sitting here, sat back and said, “People should come back to work because it’ll increase productivity and lower inflation.” I thought that was a unique take on coming back to work. But that’s what he said last week.

So effectively, I think it is an interesting experiment. And I will tell people, if you go to any international market, they’re all back. Okay? So America is an outlier in this one instance right now. And I joke with people, I’ve been in Milan, I’ve been to Paris, been to London and go look at the offices. They’re full and I say, “Who would’ve thought the Italian, the French and the English were harder than the Americans?” It’s not even possible. So I don’t know the answer to the question. I think the jury is out. I think this is an experiment. And like I said, I think there’s a hybrid environment. And I think I agree, I think there’s certain jobs you can do remotely. You need to bring people in for culture to meet their colleagues, to give them some sort of a connection. And other times you don’t have to do that. So I think it’s an evolution.

And I will say, I think what people forget is that 60% of people came in pre-pandemic, 100% never came in. Whether they were on vacation, they were visiting people, they were running an errand, they were staying home for a sofa delivery, whatever it was. The only difference before was if I was having a delivery of a piece of furniture, I had to take a vacation day. Although I was working the whole day from home. Now, I don’t have to take a vacation day. It’s completely accepted to be there to take that delivery. So I think what people don’t appreciate is, it was always the case. Now we are more vocal about it. And so effectively what everyone talks about is, okay, 50% of the people will come in 50% of the time. So it’s only a 10% delta.

So I think the answer is that if there is a purpose to come in, then you should come in. Okay? If you are meeting people, it’s more effective to do it coming in. So I’ll tell you a story, I spoke to... What’s her name? I can picture in my head. You’ll tell me, the lady who wrote Lean In from Facebook.

Burton: Sheryl.

Sandeep: Sheryl, okay. Sheryl Sandberg, correct. So I spoke to her and I asked her a question, this is early in the pandemic, maybe a year, year and a half ago. And I said, “I have a question to ask you. How do you lean in on a Zoom call?” And she said, “You’re right. Never thought of it.” She said, “You know when I’m in a conference room, I can have everyone lean in, I can look at people, see their focus, because I can look at everyone. On a Zoom call I can’t really do that.” So there is truth to the aspect that there’s something about human interaction, but it’s going to be, like I said, hybrid. So I think we have to accept that.

Burton: So putting WeWork aside for a minute, you talk to business to executives from large and small companies. What is your take on the next couple years of the global economy? And every time I talk to you, you’re outside the country, so you’re seeing a lot of different perspectives.

Sandeep: I don’t think anyone has lived through what we’re living through. There’s no real example. I don’t think anyone has gone through a pandemic variance, a war, supply side problems, inflation, rising interest rates. Most of the workforce today has no idea about rising interest rates. I said to someone the other day, when I graduated from university in 1983. In 1984, the federal funds rate was 20%. 20%. Okay? It’s 2% and we are freaking out. And so, none of us have lived through the combination of these factors. And so it is hard to really think what happens in the next two years. I do think we go into a recession, because I think unfortunately the fed only has one tool, which is to raise interest rates.

Burton: Right, raise interest rates.

Sandeep: But I was talking at a dinner last night and I was saying, “Is that the right thing to do?” Because who does it affect? It affects the middle-income people who have mortgages, who have loans, the middle to lower income people. And so by raising rates, what we’re doing is putting a burden on people who are already strapped. We’ve been trying to lift ourselves out of poverty since the day of FDR, since Roosevelt’s time. And the last two years, finally we were making some positive momentum. Is this going to throw us back? So I’m thinking more socially, is it going to throw us back?

So when I looked at the inflation numbers for the month of August and I said, what drove inflation? It was food pricing. And who does that affect? It affects the same people. That if you ever have to say, please stop. What do you mean? Stop eating? Therefore inflation’s going to come down? Or should we do different things? So I got on my soapbox yesterday, I said, America is the number one country in the world. We have enough land to feed 7 billion people if we just invest in agriculture. We have enough energy to provide in this country. If we just stop buying outside oil, we could feed ourselves. And we have enough labor because every person in the world wants to come and live in America and our immigration policy’s strong. So if you think, why is there such low unemployment? There’s 3 million people that have not immigrated to this country in the last two years that would’ve normally immigrated this country. And you have 3 million people who retire. So you’ve got 6 million people less in the workforce. So we can solve all these problems.

Unfortunately, I don’t think we’re solving these really big problems. And I do think that’s going to result in a recession environment, but I hope it doesn’t get back in the 1980s where you see rates going up to 5%, 6%, 7%, because I don’t think this economy is ready for that kind of a shock. But I do think, look, this winter’s going to be very important in Europe. There’s going to be huge energy problems. As we know, people can’t heat their homes. We don’t know what’s going to happen. And so I think it’s a lot of unknowns to be perfectly honest. Energy is a big problem. I mean, leaving everything else aside, manufacturing is going to be down in Germany because they have to cut it down so they can heat their homes because they don’t have the gas coming in from Russia. So, I don’t think we’ve all experienced what’s going on, so I don’t know that there’s a textbook. But it seems pretty obvious that we go into recession.

Burton: Yeah. Yeah. My first mortgage was 13 and 3/8 percent, 30-year fixed. And I thought I got a good deal.

Sandeep: There you go.

Burton: My first business I borrowed at 20%.

Sandeep: I’m not so far off from you. I bought my first house. I had to borrow money on my credit card to pay for the closing costs.

Burton: Closing costs and something called PMI because I didn’t have 10%.

Sandeep: So it was 18% interest on my credit card. So been there. And so I think it’s really unknown. I think we’re all in for a rude awakening. But I do think we go into a recession. I think it’s hard not to see it.

Burton: One of the themes of the conference is purpose. How do you see your purpose at this point?

Sandeep: We always talk about what’s the purpose of coming to work? Or what’s the purpose of anything else? I actually look at it two ways. One is I feel this immense duty to my colleagues. They’ve given their blood, sweat and tears to this company, many of them for 10 years, surprisingly, many of them for over three years. So I feel that I owe it to them to make WeWork a company that is going to be at the forefront of work. And I really feel like I want to do it for them because they’ve put such a stake in the ground and there’s such a love for it. So honestly, for me, it’s my people. And so my purpose is to make sure that they’re employed and they enjoy the environment. They gave their blood, sweat and tears for all these years for a real reason. And to create something that’s sustainable for the long term. I’m all about work, unfortunately.

Burton: You and me both. So last question, what advice do you have to an entrepreneur starting a business in this economy?

Sandeep: I have a 25-year-old son who had a nice job for two years. He graduated in 2020. On August 1st, he quit and he became an entrepreneur. So I’m actually living through his desires to be an entrepreneur. I would say, I’ll give you advice of a gentleman called Sam Zell, who is very, very large in the real estate business, one of the icons in the business. And Sam Zell used to say that, “It’s always easy to look at a deal or look at a project or look at a business and see how it can make money.” Because obviously you don’t become an entrepreneur unless you think you can make money and you can create a living. “But you have to go there and say, ‘If I’m going to do this, can I survive the loss?’” And no one looks at it as the surviving of the loss and say, “Okay, if it doesn’t work up, what is the backup plan? Can I survive spending that money? Did I do the right thing? Can I risk it?”

And by the way, this country is full of entrepreneurs. That’s a beautiful part of this country, right? Okay? So I always look at a deal now and I sit back and say, “If it goes south, am I still going to be viable?” So that’s my only recommendation is look at the downside as much as you look at the upside. And obviously, we have to be optimists and we look at the glass half full which is why we’re entrepreneurs. But we should never lose sight of the downside.

Burton: Excellent advice. Thank you for joining us at PeopleForce. From the outside looking in, you’re doing a great job. Keep it up.

Sandeep: Become members of WeWork.

Burton: Yeah. There you go.

Sandeep: Help me become profitable. Burton, thanks so much.

Burton: Thank you so much.