Earlier this week, The Wall Street Journal reported that WeWork is expected to file for bankruptcy next week.
Surely that news must have created pangs of pain in the venture capital industry.
WeWork was after all a $47 billion colossus at its peak, in early 2019, before the pandemic sand-bagged the firm. This post is neither about WeWork’s peak valuation (the WSJ report described it as ‘astronomical’) nor its widely anticipated Chapter 11. This isn’t also about what-could-have-been if it weren’t for the pandemic. Or its founder’s various transgressions.
This post is about the problem WeWork was trying to solve. There would be very little disagreement over that. Co-working spaces remains as elegant a solution as ever. And WeWork ─ present in 777 locations in 39 countries across the world ─ checked the right boxes on scale and adoption as well.
So, yeah, that is the context here: what kind of problem do you pick to solve when capital is cheap?
Co-working WeWork? Bed and Breakfast @ Airbnb?
Or….
A dog walking app @ Wag! Group Co. or 10-minute grocery delivery apps?
There is a sub-context here, a parallel: the profligate spending of the private sector over the last half-a-decade on some inane ideas must serve as a stark reminder to the public sector ─ especially since we are now in an era where capital is no longer cheap ─ that capital must be rationed out only to ‘problems’ that need solving.
Else, any excess of ‘Revenues’ over ‘Government Expenditures’ is best directed to paying down ‘External Debt’ (A quick look at IMF’s Fiscal Monitor shows some remarkable stories ─ Oman, for example, has moved from a deficit of 15.67% in FY 2020 to a surplus of 6.25% in 2023!)
So, what would be public sector equivalent of spends into 10-minute grocery delivery apps?
Unfunded tax-cuts. Populist, vote-bank driven schemes. Unsustainable Subsidies.
2024 will witness general elections in India, Indonesia, Mexico and the US.
Fiscal prudence will be tested.
