Why WeWork and Theranos have ‘so many similarities’

Wall Street Journal reporter and co-author of ‘The Cult of We: WeWork, Adam Neumann, and the Great Startup Delusion’ Maureen Farrell joins Yahoo Finance’s Alexis Keenan to discuss the similarities and differences in the leadership cultures found in WeWork and Theranos.

Video transcript

ALEXIS KEENAN: I want to welcome Maureen Farrell. She's a capital markets reporter for the "Wall Street Journal." Her former co-worker John Kerry first revealed the problems at Theranos. Maureen is also a co-author of "The Cult of We." It's a dive into the influences that drove the funding into the also-embattled office rental startup We Work and its founder, Adam Neumann. Maureen, welcome.

MAUREEN FARRELL: Thank you so much for having me.

ALEXIS KEENAN: So I cannot think about Theranos without also thinking of the hype and the letdown at We Work. And although We Work remains a going concern and it's based in New York, it's really an example of history already repeating itself and with much bigger dollars attached. So you describe the meltdown as a vital parable of the 21st century economy in your book. So what kind of similarities did you find or do you see between those two companies?

MAUREEN FARRELL: Sure. I mean, there are so many similarities, and primarily it is this true cult of the founder and a wide roster of investors. In the case of We Work, somewhat different than Theranos. It was some of the top investors in Silicon Valley and some of the most seemingly sober investors in the world of Fidelity and T Rowe Price, but all really buying into the hype around the founder and essentially giving-- we kind of compare it to giving teenagers keys to a car, full tank of gas. No limits on what the founder can do and-- questions but no way of really gatekeeping these founders. I think that was the case with Elizabeth Holmes and Adam Neumann the CEO and co-founder of WeWork.

ALEXIS KEENAN: Now there was a recent "New York Times" piece written by Shira Ovide, and she questions if these quote, "boundary-pushing executives" are an inescapable part of innovation. Do you think that could be just the case?

MAUREEN FARRELL: It's hard to tell. I mean, I don't think it has to be the case. I think we're in this era where it is the case right now where these boundaries-- it seems like investors are too scared to put boundaries on these founders for fear-- it's this whole FOMO culture, fear of missing out on this investment that's going to be the next Amazon, the next Google. I mean, but you look at Amazon, right, one of the biggest companies in the entire world, one of the most innovative companies. And something that sort of built specifically Adam Neumann is founder control where the founders have so much more power and essentially all the voting control of a company.

The founder of Amazon, Jeff Bezos, did not have that. Everyone talks about Steve Jobs, Jeff Bezos, and they actually didn't have that. They had some boundaries that-- if they failed, Steve Jobs famously was pushed out. He learned a lot of lessons, and then came back and revived Apple. So I don't think it really has to be part of innovation. I think right now, that is the mindset in Silicon Valley, but I don't think it has to be.

ALEXIS KEENAN: Now I want to switch gears and look at it from another perspective. I want to show a clip from the film. And it's an interview with former Theranos board member Dan Warmenhoven, and then I'd like to get your perspective on the other side of it. Here's what he had to say.

- This is going to sound a little strong, but to a certain degree, she's a victim because she didn't know what she didn't know, and she relied on people who gave her bad advice or mismanaged it, I think.

ALEXIS KEENAN: So here I want your thoughts on whether you think it's possible that founders like Holmes or Neumann or others are really set up in any way to fail.

MAUREEN FARRELL: I think to-- first of all, I think that's way too strong to call her a victim. I mean, she knew-- from everything I've ever read-- she knew that didn't work, was putting people's lives in danger. Yet I do think-- there's something to that that I do think makes sense. I think they are-- founders are set up to fail. It's unhealthy to not have boundaries on founders and to really just give them so much room to sort of run themselves into the ground. I mean, I think about that a lot.

I mean, Theranos-- it just didn't work. But we were there was something there, and I think, what if the board members stood up to him and told Adam Neumann he couldn't buy a $65 million private jet, he couldn't loan himself-- take out loans, and do stock sales worth a billion dollars? What if they actually made rules and forced him to stick by them, forced the company-- really took a harder look at the company and these very obvious red flags? Could he-- could its fate have been avoided?

Could it have been maybe a slower-growing but better, more solid company. So there's something to it. I think Dan Warmenhoven's taking it a bit far in the case of Elizabeth Holmes and Theranos because I mean, it's just so inconceivable for her to be the victim of it. But there's something there.

ALEXIS KEENAN: Well, we know that Elizabeth Holmes will make a go of it in her defense as her trial begins, that victim idea. So Maureen Farrell, "Wall Street Journal" reporter, thank you so much for being with us. Your insight is invaluable.