Money Quote Oct. 24 2017
WeWork buys Manhattan, a Facebook media freakout, Amazon flirts with 238 cities, climate change is real, tech IPOs are back.
I’m fascinated by Saudi Arabia (and other “petro states”) — here’s an entire nation born on third base, now responsible for moving its economy into uncertain waters as the Petro Age unwinds. Given the amount of capital the country has to deploy, what it will do with its windfall, and how it manages the transition, is a massive story. From what I can tell, it wants to convert its entire economy into one elephantine hedge fund. I dunno how that’s gonna work out. Money quote: “Many of the attendees will be hoping to get some of the billions that Saudi Arabia is investing with outside money managers — and Blackstone has been busy grabbing its share. Mr. Schwarzman explained to Andrew Ross Sorkin the world’s interest in partnering with Saudi Arabia, saying, “Saudi Arabia is moving aggressively to diversify its economy and implement important reforms.” Worth noting: The Public Investment Fund has been troubled by disappointing investments and has struggled to calculate its own value, WSJ reports. The fund has been pushing back against parts of a deal with SoftBank that could cut Uber’s value and force the fund, which invested $3.5 billion in Uber last year, to take a loss.”
WeWork’s in the news again, this time for buying a store that my wife, a New York native, said “was beautiful when I was growing up.” Lord & Taylor’s site is a New York landmark, and now it’s going to be the headquarters for a hot real estate play draped in the NewCo ethos of work-is-the-new-black. But before anyone gets too excited, let’s not forget we’ve seen the movie before, and the ending changed on us. Remember when Uber bought the Sears building in Oakland? Yeah, that didn’t work out. Money quote: “For WeWork, which positions itself as real estate for the millennial generation, the deal for the flagship department store gives it powerful imagery on the changing winds of real estate. The seven-year-old company has become one of the world’s richest startups, with a valuation of more than $20 billion. It generally takes on long-term leases for raw office space and builds out the interior with flexible spaces and modern design that it then subleases for terms as short as a month.”
Media coverage: Time to freak out, Facebook is about to step on our throats! Facebook: Jeez guys, just testing some stuff out, nothing to see here, move along! Money Quote: “Regardless of whether or not Facebook chooses to roll this out fully, it’s yet another reminder of how important Facebook has become for the media world, and for news distribution in particular. (Two-thirds of Americans claim to get some news from social media.) Facebook has a long history of changing the rules on a whim, leaving publishers scrambling to keep up.”
The bids are in for Amazon’s “HQ2” — more than 200 of them. As I wrote earlier, I don’t think this is a headquarters at all, but time will tell. I wonder how much collective community benefit was wrapped into all those bids? Probably enough to solve homelessness and drug addiction across the United States. How is it that only Amazon has that kind of convening power? Oh wait, Saudi Arabia does too! Money quote: “Some cities, like Boston, have published the entirety of their proposal. Others, like Stonecrest, Ga., have used the opportunity to earn 15 minutes of fame by offering to rename their city “Amazon” if they win. Even federal lawmakers that are responsible for regulating Amazon — and some who have been critical of the company — have been part of the pitches.”
Ouch. Quite the reality check here. Climate change is real, rising seas are real. Our response, unreal. Money quote: “While billions have been spent to repair the damage, protecting vulnerable infrastructure, people and property across the nation from the more extreme weather that climate change could bring is going to require investment on a staggering scale, easily costing hundreds of billions, perhaps trillions…Some coastal protection projects are moving forward, but the most ambitious ideas spurred by Sandy’s onslaught are still in the design stage, with questions about whether they will ever be built.”
If you’re in tech, Fred Wilson saying things are looking up will put a smile on your face. Money quote: “Based on everything I am seeing, hearing, and reading, 2018 and 2019 will be bumper years for tech IPOs, assuming the markets behave.”