Lecture Six: WeWork Exercise, Instructor’s Analysis

I have highlighted jargon in yellow:  

We can prioritize growth within our existing pipeline. By focusing on our existing pipeline of locations, we would increase the percentage of our location pipeline comprised of mature locations. A larger percentage of mature locations allows us to avoid incurring future capital investments to build out new spaces or the initial expenses associated with driving member acquisition at new locations.

We can control the speed of growth of our new locations. We believe decreasing our growth increases occupancy and provides us with price elasticity because of the limit on supply. We have seen this occur where we have strategically slowed growth in certain cities. For example, following the Brexit referendum, we temporarily slowed our growth in London, resulting in an incremental 10 percentage points of occupancy. We have since resumed more rapid growth in London. As of June 1, 2019, our occupancy in London was 93%.

My rewrite

We might opt to focus on the markets where we already operate. That would mean we would have a higher proportion of mature locations. It would mean we do not keep spending on building more office space and then marketing it.

We could also opt to slow down construction of new space in new cities, which would limit the supply of office space and allow us to raise prices. This is what happened when we made a strategic decision to slow down growth in cities. For example, after the Brexit referendum in 2016, for a while we slowed down the rate of constructing more office space. Our occupancy rate increase by 10 percentage points.

Observations:

After rewriting the text, I can see that the original text states the obvious. Of course, if you stop building more office space, over time the proportion of mature locations will grow. One could hardly claim that this is a “lever.”

 WeWork presents the slowdown in construction of London office space following the referendum as a strategic choice. Brexit created a lot of uncertainty. Many building companies slowed down construction of new office space amid reports many companies were thinking of reducing operations in London and relocating staff and even headquarters to European cities such as Paris and Frankfurt. What WeWork portrays as “strategically controlled growth,” one might argue, is little more than a common-sense decision to reduce risk of constructing more space than tenant would demand following Brexit.

 Also note that the paragraph began by talking about new locations. London was not a new city at the time the prospectus was written, nor at the time of the Brexit referendum.

I have highlighted jargon in yellow:

We can prioritize growth within our existing pipeline. By focusing on our existing pipeline of locations, we would increase the percentage of our location pipeline comprised of mature locations. A larger percentage of mature locations allows us to avoid incurring future capital investments to build out new spaces or the initial expenses associated with driving member acquisition at new locations.

We can control the speed of growth of our new locations. We believe decreasing our growth increases occupancy and provides us with price elasticity because of the limit on supply. We have seen this occur where we have strategically slowed growth in certain cities. For example, following the Brexit referendum, we temporarily slowed our growth in London, resulting in an incremental 10 percentage points of occupancy. We have since resumed more rapid growth in London. As of June 1, 2019, our occupancy in London was 93%.

Rewrite

We might opt to focus on the markets where we already operate. That would mean we would have a higher proportion of mature locations. It would mean we do not keep spending on building more office space and then marketing it.

We could also opt to slow down construction of new space in new cities, which would limit the supply of office space and allow us to raise prices. This is what happened when we made a strategic decision to slow down growth in cities. For example, after the Brexit referendum in 2016, for a while we slowed down the rate of constructing more office space. Our occupancy rate increase by 10 percentage points.

Observations:

After rewriting the text, I can see that the original text states the obvious. Of course, if you stop building more office space, over time the proportion of mature locations will grow. One could hardly claim that this is a “lever.”

WeWork presents the slowdown in construction of London office space following the referendum as a strategic choice. Brexit created a lot of uncertainty. Many building companies slowed down construction of new office space amid reports many companies were thinking of reducing operations in London and relocating staff and even headquarters to European cities such as Paris and Frankfurt. What WeWork portrays as “strategically controlled growth,” one might argue, is little more than a common-sense decision to reduce risk of constructing more space than tenant would demand following Brexit.

 Also note that the paragraph began by talking about new cities. London was not a new city at the time the prospectus was written, nor at the time of the Brexit referendum.