Leaving aside all of the headline-making entertainment of Adam Neumann being Adam, the real problem here is that WeWork really doesn't have much in the way of enduring network-effect advantages -- even though it tried so hard to convince investors otherwise.

In many tech-fueled marketplaces, getting big in a hurry is a practically unbeatable advantage. I saw this 20 years ago when I was tracking eBay. No end of little players would approach me and say: "I've designed a better marketplace than eBay. If I just had 1 million users, you'd see how good it is."

But it was too late, and there was no way for them to go from 10 users, to 10,000, to anything bigger. Loyalties on both sides of the market were already sewn up. Both buyers and sellers wanted a deep, super-smooth market where they could transact 10-50 times a month without ever being frustrated by a lack of market depth.
When people need a viable market many times a week, switching costs become unfathomably high. eBay owned that concept for as long as it would work. It's been basically the same story for Uber, Lyft, Twitter, etc.

But this is not true the one-time need of renting this season's splashy workspace with free kombucha. Tenants pick their spot and then stay for 3 months, 11 months, three years or whatever. There's a little bit of shuffling around and re-transacting, but not nearly as much.

Besides, if the WeWork concept is that good, it's easy to copy and does not need giant scale to work. That's totally different from trying to build the third ride-hailing service. In this case, someone who owns three office buildings in Chicago's West Loop can convert them to a WeWork clone and rent them just fine to people who want to be in that neighborhood.
The fact that this new outfit (WeLoop) does not have a London outpost or a list of 75,000 other tenants in other states is irrelevant. Buyers show up for one transaction (get me a groovy office space in my neighborhood) and then they are done. That is already beginning to happen, in fact.

Yeah, WeWork has a greater ability to serve large corporations that want an ever-changing blend of space in a lot of cities. But that's not its core market. And even if it is, WeWork isn't automatically better off than existing REITs that can tweak their multi-city properties as needed.

So it's brave of Team Adam to go into a lot of cities all at once and tell people that this year's losses will soon give way to profits once the buildings fill up. But that doesn't seem to be happening on schedule. And even if WeWork eventually gets to breakeven, that just entitles it to compete against a lot of established players who already own better buildings in better locations -- and who can clone whatever elements of WeWork design seem appealing to customers.

Getting access to capital on super-friendly terms gave WeWork the ability to build fast, almost regardless of what the short-term economics might be. But now access to capital is getting quite a bit harder.

And that can feed on itself in scary ways. Once capital gets scarce, a lot of expansion plans get much harder to carry out. Now growth slows. And that makes investors more jittery. Borrowing rates go up; loan covenants get tighter, and equity dilution gets more severe. Growth shrinks further. Money gets tighter.

In such situations, it takes a skilled pilot to land the plane safely, let alone regain altitude.