Disrupting the World's Largest Asset Class with Adam Neumann

and I just want you to know that it's part of the game to get punched and the question is not are you gonna get back in the game the question is is when back in August after a6c announced our investment into Adam Newman's new company flow it felt like almost everyone whether it was other VCS Founders or journalists had something to say but the one person you didn't hear from was Adam himself and this never shared before footage from our American dynamism Summit back in November Adam sits down with a16c co-founder Mark Andreessen and a 16c venture General partner David ulovich they start by discussing why Adam's chosen to step

back into the arena but also why flow that leads into the inevitable conversation around how the pandemic fundamentally shifted both work and home as they touch on a16z's move to the cloud cities as startups and ultimately what it might take to disrupt the world's largest asset class we also get an insights group into how Adam is thinking about the four pillars of flow from technology to financial services finally this video was recently published alongside our full live library of American dynamism Summit recordings which you can find at a16c.com ad-summit [Music]

[Music] thank you gentlemen for being here I'm going to just jump right into it those of you that have uh heard Adam and Mark speak know that they have a lot to say and they're very smart so we aren't going to waste any time Adam three years ago you stepped down from your role as CEO of wework one of the most well-known real estate companies ever created you could have sailed off into the sunset a lot of Founders do that hang out in the Mediterranean uh but you decided to start another company again you're not naive you know it's hard you know that there's a lot of attention on

you uh so how did you decide that you wanted to Chase and build a new impactful company and uh chase a big vision and dedicate your time to building why why get back in the game get back in the arena first of all thank you for having me thank you Mark thank you David I apologize about the sandals I broke my toe I'm supposed to wear different shoes you know when I stepped down three years ago [Music] the first thing I actually did was I took a moment and I just wanted to take a second and think of the successes but also think of the mistakes and the

lessons and all the different things that that I did and that we did as a team and even though I was very proud of what we built I really felt like there was a lot of thinking to do and that was sort of my first thing as that was happening I started building a family office and with my family office we invested in about 50 Venture Investments we did private Equity Investments we did liquid market trading and each one of those things taught me something new that I wasn't aware of before liquid markets actually taught me about Wall Street and as I was sitting with the team and we were doing different investing and listening to

earning calls I was like oh wow that's what you guys are listening to and that's what's interesting for you and that gave me a perspective that I didn't have before when I was sitting with entrepreneurs as we did our Venture investing the first part when you invest and write the check is a lot of fun but then comes the part where you're talking to them and listening and they have problems and I got to give advice to these entrepreneurs and they didn't always listen and I was like okay that's how it feels when an entrepreneur is on the list I was like okay I got that and that taught

me a lot and actually made me understand Mark and Ben and Venture Capital more and as we're doing all of this and this is now where covet is happening this is March 2020 we were looking at real estate because it's something we care about and we just felt that there was going to be an opportunity in multi-family it was a simple trade it was cap rates were at four eight and we thought they were going to compress and we saw interest rates and we thought there was an opportunity so we decided to go as a as a family office very deep into multi-family we bought approximately 4 000 Apartments and as we're doing that I started

walking these buildings and even though initially it was a trade I started feeling like there was something more that can be done I started feeling like the residential experience is not what it should be and just to backtrack this a little bit so going backwards again to 2019 we're stepping down and now it's early 2020 as the whole thing is happening and maybe you wouldn't be surprised but the phone is not ringing as much as it used to be just a few months before I got a phone call from Mark and we never met and Mark introduces himself hello I'm Mark Andrews and I said I know you are mark thank you so much for calling me and he

sort of we're having discussion we're talking about something but very quickly turned to Mark asked can we saw Adam how are you doing and I told him this and that and this and that and he says to me oh you're still in that stage and I look I was like this was on the phone I said the mark what stage is that and he goes the stage where you believe everything the media says and I said that well I'm not in that stage and I know we built a great company and of course I don't believe but you know they are saying quite a lot of things and Mark says to me Adam we don't know

each other but let me tell you something about venture capital and high growth companies and the bigger the Venture the bigger the growth what I'm about to tell you is more true it's hand-to-hand combat anybody who doesn't know that Ventures hand-to-hand combat doesn't actually understand or has never done it before and when you fight once in a while you get punched and he said I guarantee you because he was very nice he said a lot of our companies use your products not just in the US but all over the world instead I guarantee you that for every mistake you made there's a hundred things that you did right and I just want you to know that it's part of

the game to get punched and the question is not are you gonna get back in the game the question is is when and just so you know you have a friend here that you've never met before but we've been tracking even if you ever decide to do anything then then call US and now fast forward well I'll say one more thing about it because it was very meaningful I hung up the phone and I still remember this I walked to Rebecca my wife and I was like I just had the most amazing phone call this guy Martin treason and explained to her who Marcus called me and basically was very encouraging and gave me a different perspective to look at what just

occurred and she thought it was amazing and I thought it was amazing and Mark I don't know if I've ever had the chance to actually tell you it was a meaningful moment for me and I really appreciate it and fast forward now a year and a half we kept these buildings that we bought ended up being a really good trade and everything that we thought was happening was happening and we started building this brand it didn't have a name yet but we started building this business and we saw all this opportunity which we'll talk about a little bit later and around February we spoke again and Mark asked

me what's up and I told him what was happening and that we've been developing in the business by this point this is over a year old and we've been doing more and more and we started Building Technology and we bought a company and we did a few different things and Mark said that when you come and present it to the team and we went and we met the team and the first thing I noticed when we all met is that the Andreessen Horwitz team was not like the venture capitalist that I was used to and I had quite a lot of experience with Venture Capital before and it didn't feel like investors it

actually felt like businessmen like entrepreneurs and I actually asked I just asked mark behind stage I said how many partners do you have that are entrepreneurs and he said 20. and I gotta tell you that's very different from other businesses and as as we're having the discussion one of Mark's Partners asked me Adam are you raising money and I said I'm not sure we're going to build this one on our own I'm not sure because one of our lessons was you got to choose your partners really carefully he said well maybe you should consider us let us look into the business and see if it's interesting and if so maybe we should

consider us and then Digi led a very rigorous diligence process and they asked us a lot of questions and learned everything about our business and as we were getting to know Andresen I realized that these are the kind of partners that I was always looking for but never really knew that existed so to answer your question I was always building it but building it with a partner was something that only happened because of this demon because of the way I met them and I could just tell you that we had our first board meeting and one minute afterwards Mark called me and said Adam can I give you some feedback I said of course Mark he

said well when your team said this and this and this I don't agree with that let me tell you why and here's the experience I have and here's what I want to warn you from so I welcome the feedback I'm so excited to be a partner I'm excited to be back in the game not alone but with the team and we're just getting started but the future is there's a lot of potential that's that's awesome and I will say on there's a whole bunch of venture capitals in the room and we are all very happy that we work exists so that our portfolio company is not signing these long-term leases in this Dynamic world that we live in and they get to go into the

offices they want to be in in the right cities at the right time so what we're going to talk more about flow in the new business in a moment Mark I want to shift to you you know you and I have talked about housing for a long time long long before this investment something you've thought about for a long time why is housing important why is it particularly relevant why is it even part of American dynamism yeah so there's a critique of Silicon Valley in the tech industry that you know on various sometimes I agree with sometimes I don't but um you know there's a critique that basically says

look you guys have done a great job you know silicon Valley's done a great job over the years like the really like unimportant things um and so like you know um you know you've consumed electronics and video games and media and e-commerce and like it's all great it's all fine it's all good and by the way like we do those things we're very proud of our efforts in those spaces and we actually think we actually think they're very important but you know they're basically they're small slices of GDP um and then if you look at basically the GDP pie chart which is also the you know sort of consumer spending pie chart the

the things that people spend money on that really matter in their lives there's basically three really big ones uh right Healthcare education and housing um and if you look at kind of all the economic statistics by sector Healthcare education housing are basically increasing uh you know in terms of cost you know at a much faster rate than than all the others um and there are the sectors where the the tech industry has had the least impact historically and you know and of those the biggest one is housing right it's sort of the housing is the single biggest uh you know kind of thing that most families spend money

on um and so you know it's really Central you know for from from that standpoint um you know it's very Central from a from a from an economic standpoint in the life of a family because right there's this you know very big question which is you know if you you know if if you own there are you know potentially big downsides because you might be stuck you know in one place where maybe you don't want your family to be for the next 30 years because maybe opportunity shifts around um you know but if you rent you don't necessarily write build up Equity by default you know with the way that most

uh most uh most apartment offerings work um so they're you know so there's big economic consequences there's also big social consequences and political consequences right which is um you know and this is something that's kind of been deep in the American character for you know for for many decades but this idea that if you basically if you if you have a sense of commitment if you have a sense that you are actually invested in the place where you live you were more connected to the society you're more connected to the culture and then ultimately you're more you know you're more connected to the politics you know

to the politics of the to the political uh to the political body um and so you know there's been long-running policies in in you know the United States to encourage homeownership now it turns out those could be overdone they can end up with problems and we saw a lot of the problems that kind of you know came out of that approach and you know kind of the historical approach in the in the 2008 financial crisis but nevertheless there is like a very kind of big deep meaningful you know kind of sense of identity that comes with uh comes with housing um why does this matter uh you know kind of from a from a broad standpoint

um so the reason I think this matters so much is because uh geography is so um uh Central to economic opportunities so right so so basically take a step back uh the role of cities right in human society so like cities are a human invention you know if there were many hundreds of thousands millions of years where you know people you know people were running around without you know in clients and tribes uh not forming into cities then about 4 000 years ago cities were basically invented and and people started to Cluster uh that way um why were cities invented a bunch of reasons but one of the big ones is there's there's economic payoff to being

in a city and the way that it works is if you are you know if you have a certain level of productivity and you're in a rural environment you don't have many opportunities to work with other people right who are highly productive if you move to a city all of a sudden you're surrounded by lots of other people who are highly productive and all of a sudden there's a catalytic effect basically this this this positive feedback loop that forms where kind of everybody becomes more productive and so basically it's the these cities are basically the foundation of modern economic growth economists call this the agglomeration effect which is basically

if you like slam people together you you know sort of uh you know you can get a lot of good things out of that um you know the the the the the West developed you know we the the story of the West is the story of cities and the creation of all these the you know these these amazing cities um and then you know over the last 50 years you know that that kind of trend has gone into hyperdrive and you've had this emergence of what economists call Superstar cities where you've got these specific cities like Washington DC New York City Boston San Francisco Bay Area Los Angeles you know um and then you know internationally London and Tokyo

and Singapore and so forth and Paris there are kind of these cities that are like irresistible draws for people who are you know highly ambitious and want to be around a lot of other highly ambitious highly productive people it turns out as a result of that Superstar City clustering thing there's been a bifurcation in the housing market right where basically those Superstar cities they become you know basically occupied at some point you know people end up with a political agenda and then they stop building housing right and so the places where people want to go and want their kids to go are very difficult to get to in the San Francisco Bay area is

like a you know a classic example this you know San Francisco last year like authorized I think 6 000 new housing units right which it was just like an absurdly low number relative to the the demand for people who want to move there um and then the places where that do not have this kind of clustering agglomeration Superstar City effect you know they build plenty of housing but there's not there's not as much opportunity there so so heading into covid you just you saw this incredible bifurcation and you saw the American economy and you see it in American politics where basically you're either in a city you buy a home

you know you've kind of got got you've got the whole commitment you've got that level of opportunity for you and your family right or you're in a more rural environment and you're basically stuck and you don't have access to good jobs and your kids are not going to have like high-tech jobs and it's you know basically it's you're going to have a lower quality of life um this was becoming a very big issue this become a very big issue by the way for for us because we were kind of we were basically getting stuck in the geographic confines of Silicon Valley like we were our companies were like penned in and it was becoming very hard

for companies to grow in that area and then basically you know a horrible tragedy struck that turned out to also be in some ways a miracle in terms of I think the long run consequences which is coven right and you know none of us would have hoped that covet would have would have happened and it has been a horrible tragedy for for many people and I think you know broadly for our society but nevertheless covid was a System Shock right that caused all big companies to basically instantly Move online and a hard cut over you know in kind of a way that I never imagined was possible um it was also an instant proof that

companies really can run at least for some time they can actually run uh online right basically like no big company actually stopped operating as a consequence of this dramatic shift from from in person uh to online um and then all of a sudden like that opened the door to you know every CEO every manager every entrepreneur every investor thinking oh um okay the post-covered world is not going to be like the free coveted world the post-covered world is going to be an opportunity to rethink and reinvent how companies are organized it's going to be an opportunity to reinvent how Industries are organized it's going to

be an opportunity to reinvent you know how geography works right what the role of cities is it's going to be an opportunity to spread the economic activity from cities much more broadly you know potentially throughout the country um you know every employer every company every CEO here you know is is having some version of this conversation you know with their own company we talk about this with our Founders all the time um and then there's the corresponding question that's opened up which is how are people going to live um and some people are going to continue

living the way that they were and some people are going to undertake a radical change in how they live and they're gonna you know they're gonna go they'll go remote and all of a sudden you know you go remote and you have access to you know thousands of jobs anytime you want which is a totally new phenomenon um and then there you now have the opportunity to rethink how how families live right and so you know is it necessary for ambitious kids to leave a place where they grew up in order to have access to first-class Economic Opportunity in 2019 he asked her that was frequently yes today maybe not um and so and and I should also say like

it there's no like this is not a zero or 100 thing this is not like a hard cut over it's not like the whole world goes remote or stays remote right which is not what's happening but there's this moment in time that we're in right now which is like we can actually we can rethink and reinvent how companies are organized um and how work happens and then we can also reinvent how people how people live and give people a lot more options and how that happens um and so I I think basically the presumptions that have underlied the whole structure of how the housing market works and how the industry works

and how people live and work I think it's basically all it for grabs I think we have about a five-year window I think as a society to kind of figure out what this means and how to adapt um yeah let me pause there that was awesome um perfect answer which is a good it's a good segue to where I want to go into which is uh we we have seen work become more Dynamic people now sometimes go into an office some days a week sometimes they go in for a couple months and they go to a different office a different city um you know like we work with quite equipped for this kind of dynamic work lifestyle what are the lessons that you

have learned from wework that you're going to apply to flow or things that maybe you didn't you didn't do it we worked but you thought about that you're going to apply to flow particularly around sort of this changing way people live and work and how people as we get to rethink the way that we sort of organize ourselves and and bring ourselves to to work into home so I think you're right I actually think flexible work is more relevant today than 10 years ago so I actually think it's a better idea today than it was the obvious lesson is community I think Corona I think on top of everything that

Mark just said and I'm not going to repeat any of it but but that's the data that pushed us into being as interested as we were in this category but on top of all of that we for a lot of time I think a lot of people argued Howard Schultz used to say Starbucks is the third place I remember once having an argument with him I told him we work as the third place it was like Starbucks is the third place well I think the first place turned out to be the third place I think the home is the most important thing I think covert taught us that I think you can take your your work into your home but you can take your home into your work and that's affecting a

lot of change also to put the little numbers behind what Mark is saying 70 of 35 year olds and youngers are currently renters they don't actually buy and this number is not because of the interest rates that have been going up over the past six to ten months this is a number from 12 months ago and we believe that that number is actually only gonna grow so 70 percent are renters you said it's a big piece of their spend it's about a third of their total wallet so you have this huge asset class largest in the world 70 of its users are renters it's a third of their spend and yet they're not getting an experience that is actually up to par not to talk about the

financial you mentioned mark that they're not creating an equity and they're not creating any equity and when you put those two things together you see a real Challenge and what it's going to do and we're already saying it people are starting to work where they live and not just live where they work and therefore you're starting to see these movements between cities and you can even say without becoming too political but we're in the heart of politics maybe some of the results in midterms now showed Democrats that were actually traveling to new cities and moving to different places a lot of things are shifting and the way we live has an

opportunity right now to change because I think if we weren't clear about it before how important the home is everybody is reminded and a great home and a great experience an elevated experience is more important than ever before and then work has talked accommodate and Mark and I actually think see the world a little differently about what if our is every company going to be a remote company or in-person company but the answer is obviously hybrid of the two and as you think through well harm I'm going to solve work and how am I going to solve the future of way people live what I see is an opportunity to really affect that

change and it's exciting that we're in DC because this is one of the places where opportunities like this become a reality if I could put you put put a put a point on something that Adam said so the you know there's sort of this there's Richard Florida uh to analyzes these things talks about he calls the creative class it's kind of you know the sort of say upper middle class you know it's it's us it's our kids right um uh it's it's sort of you know Highly Educated you know kids who are going to basically go into a knowledge or create a profession of some kind right work work work at a keyboard as opposed to you know with their doing doing some

form of manual labor manufacturing and of course you know this is not most of the economy but this is sort of the you know kind of the upper middle class um you know in many ways the cultural Vanguard for the you know for the country you know they Define a lot of the trends and so there's this experience right that I'm sure a lot of us have had and a lot of a lot of a lot of younger people we know have had in the last especially 20 years you know really really 20 25 years the sort of thing where you you know you're growing up at home you you then go to college you you spend your time at College you know for or more years

um and you know you're on this campus environment and it's you know and everybody knows like college is kind of education it's kind of adult they care um you know um you know it's got all the it's gotten all the food and entertainment it's got this whole contained environment it's a social environment it's a dating environment right it's kind of this this whole thing um you know you're putatively you're an adult but you're living in a dorm and there's like a older adult down the hall who's taking care of you right so you're not really fully an adult um and so you're in that environment and

of course you know in you know 50 years ago you'd leave that environment and you'd you know go to work in an office you'd buy a you know you'd buy a starter house and you'd be on your you know sort of traditional American middle class path over the last 20 25 years it became very common to have this idea of the corporate campus right and and you know sort of Google maybe you know really kind of you know crystallized that in the in the culture um you know basically this idea that the company's facility where everybody came every day was going to basically be a continuation of the college campus

experience um and and that led to kind of this you know perk Bonanza right so you'd have this whole thing go to his campus and it's like gourmet food 24 hours a day and it's like they'll do your dry cleaning and they'll walk your dog and there's you know swimming pools and there's the thing you know by the way you know these campuses still exists they're all 100 converting all their tennis courts to pickleball courts because of course that's what everybody's doing right so so there are these you know it basically a self-contained environment and the theory of it right was if we can get

people you know especially these young people like inculcate them keep them in this kind of college campus kind of environment then they'll basically they'll work more right we'll get more out of them because they'll they'll be here more often um you know it's basically everything up to not usually including the actual bed um although sometimes people would sleep under their desk um like like Elon Musk um but everything you know sort of short of that um and so as a consequence you'd have this thing where sort of young adults kind of stayed in this corporate campus environment and then as a

consequence they had this incredible Community right they had this incredible environment right where they have you know all these friends co-workers colleagues you know their you know their teammates other people who work at the same company they're going to lunch going to dinner doing the whole thing and then and then by the way it also turns out it's that it's it's just like the college campus it's the dating pool um right um and so you know it's you know basically if you work for you know for the Google campus or the Facebook campus like where you're gonna date probably somebody who also is there because you're there all the time

together and then you basically like Drop covet into that model and you just like detonate it right which is which which is what's happened right and then all of a sudden the experience of a kid going through that all of a sudden it's like nope nope you don't get that what you get is you get to sit in your studio apartment right in front of your laptop right and good luck right and you're like cut off from everything else and like you've got doordash but and you've got Tinder and like that's your life and like that is not the same thing um and so and then you know to Adam's Point like a lot of these companies now

are thinking okay we're gonna have people come back in the office two days a week three days a week and we're gonna have them come back and chance or this or that but you know this the spirit is like Elvis has left the building for the for these kinds of environments like this is not the way that most companies are going to operate um and so all of a sudden the focus on where you live the focus on what you know are you literally by yourself you know do you have roommates are you in a small you know complex are you in a big complex do you do you have any sense of connection whatsoever do you know who your neighbors are you know most people

historically live in apartments I don't think they generally would even know who their neighbors are right the guy next door is just the guy next door you you'd feel no connection um by the way there would be no overlap where you lived and the people you worked with would have no overlap right because there was no point you didn't worry about whether there were other people who you worked with who were in your same apartment complex because you were seeing them at work all day and so do you have anything in common with the people you're in the building with um and so so there's this there's this sort of whole model that an entire

generation grew up with that has all of a sudden been detonated and I I yeah and I I don't know it may be political I think the idea of sitting in the apartment in front of the screen with doordash and Tinder is not a good life um and so that that opens the door for reinvention we don't we don't think we know it's not a good life because we've even in the office so you gave Google as an example Google was inspiration for us that we work our point was well why can't small businesses have this great campus have this great energy and that was the beginning I remember when we tried to sell Google but like can we we could take some of your stuff they're

like you can't take our stuff we're Google we invented this we ended up taking some of their stuff and quite a lot actually but um they they that same Serendipity feeling that you feel when you go when you were to go in an office and connect to this belongs in a home in a funny way way more than it ever belonged in an office and when you think of these apartment buildings and it is a little sad it's sad that there's an apartment building with 400 apartments maybe six seven hundred people with a swimming pool and a kitchen and a gym and all these amenities did when you if anybody here

has ever been in a multi-family you do this amazing tour they show you all these amenity spaces you never see anyone there you then move into the building and you not everyone but a lot of people live their life that Mark is describing and that's sad because I don't think human connection thrives I actually think I'm so happy we're here face to face and covet was obviously a horrible thing but also a miracle at the same time it's a miracle that we're all here face to face because this connection is so much more meaningful and why doesn't why don't people deserve that in the home and again I go back to that number it's a third of their wallet

spent as the Americans were used to actually for anything we spend if it's two percent of our world spend one percent of our wallet spend many companies that you guys invest in it's all branded it's always an uplifting experience if someone doesn't do good enough experience then the next person comes and elevates it and yet in residential and we can talk about why but in residential never happened and because it never happened and because it's so difficult to disrupt it actually didn't occur and what ends up happening is that renter is not getting a good deal neither the experience or the financial transaction and again that

renter is the majority of the young adults yeah I think covid was the first time a lot of people especially under the age of of 40 50 first time they ever got to know their neighbors or they never had to and they're they're proxy for Community probably was the workplace and like you said we're never going back to that whatever our new normal is it's not I'm just going to give you a thought about that it's an American thing that they never had to like in other countries where I grew up in Israel there's no such thing you don't know your numbers when you don't have sold you go to your neighbor's door you knock

on the door they don't answer you open the door it's locked you know where the key you open it up you go and you take the self you never break it back yeah then they go back there's no Soto Adam took it and and it's it's it's this it's this community here we call the police yeah yeah yeah they come in four hours it's true or San Francisco maybe never yeah yeah you guys said they said that I didn't say anything okay yeah but the point is that's it's such a natural thing for people living together to connect and yet we live in a world where even when people are in the same building they don't talk to each other in the elevator when I came to the

United States and used to say hello to everyone in the elevator people thought I was weird yeah and I thought it was weird that you wouldn't say hello wouldn't you want to know who's living there and you know we have a lot a lot of little things and we we haven't talked about really flow yet there's a lot of different ideas that we have but the simple one is when people tour a building always the the tour the leasing agent tells you about all the amenities I would like the listing agent who's not even going to be called the listing agent to introduce you to a few residents who actually like living there let them tell you why this is a great

building and if it's a fit for you or not a fit for you and that tiny little thing I just said is so small and the fact that it doesn't exist actually and a lot of people ask me Adam how come this didn't exist before it doesn't exist in my opinion because buildings are full anyway there's a short of supplies we spoke a little bit about zoning there's the numbers varies but between three to five million apartments and single family homes missing right now in the US and that number Grows by hundreds of thousands of units a year and so there's a shortage of Supply there's an over demand and no one really needed to do it and because the

landlords didn't need to do it it didn't happen and when you think of prop their companies and Technology I was talking to Steve case before for a second about proptech and I'm a little bit about about all the different Innovations when when you think well why haven't people solved this problem before most popular companies come in and sort of solve a point solution they have this one solution but then they need to take that solution convince the landlords we're not even interested in buying anything because they're making money anyway go to these old Erp systems connect to the back of these systems then get the users it's very difficult

which is why the way we want to tackle it is actually vertical I almost think it's the only way excellent the uh we're gonna come back to that in the vertical software stock for prop Tech and flow in a minute um Mark you know we we came out Ben had a big blog post about how we've moved our headquarters to the cloud we have decoupled uh the geography of the firm um so I guess the first question is like two parts talk a little bit about the thinking about moving to the cloud why did we do it and then talk about how it's gone yeah and then I'll keep you honest if I agree yeah so this is yeah this has been very dramatic I mean look

for for every employer every company this has been dramatic we've had our version of it um and for us it's been very dramatic which is we we made a very deliberate decision when we started our firm in 2009 that we were really deeply going to invest uh in the office and in particular in one office and so we were kind of semi-notorious in the industry for we only ever had one office the office was in Menlo Park California um you know this is actually controversial even in the Bay Area because there are lots of startups are actually in San Francisco lots of the younger people who worked for us lived up in San Francisco and we said you know

it's our you know and everybody every year was like we got to put up an office in San Francisco and we're like nope single office everybody's gonna be in the office and and the reason for that was we wanted the Beehive you know effect like we wanted people when they walk in both the people who work for us but also the people who are visiting us to really feel like they were tapping in the energy they were seeing lots of other interesting people you know that this was this was the kind of environment you know and the kinds of people they want they'd want to be around so we put a really big emphasis on that

um you know we were in there you know every day all day um working together you know the whole the whole thing the whole thing you get from a high functioning you know kind of office environment and then like everybody else in March of 2000 like we shut that down um and we went you know completely online um and like everybody else we were shocked that we were able to continue to run the firm you know as you know you basically keep everything going uh you know over over Zoom um and so and slack and so forth and so you know kind of often away we went um we actually then actually actually

had an incremental process right and you know the two weeks to crush the curve turned into two months turned into two years right it's not like everybody else we're trying to figure out how long this is going to last we start doing polls of our employees and we did like a poll like six months in and people were you know some people were like I can't wait to get back to the office simply people were like wow I don't know um you know 12 months the numbers moved 18 months the numbers moved and then we had one poll where it was basically like 100 of the young parents were like if you guys want to go back to the office good luck we're getting different jobs

um it's like I get to spend time with my kids I get to to be here in the morning I get to be here at night I'm you know by the way I'm working at you know I'm working from home you know you know 12 hours a day or whatever I'm more productive than ever but like I am not going to do the you know two or three hour daily commute you know from South San Jose or from you know San Francisco or from the East Bay um you know to go to Menlo Park I'm just not going to do it anymore and so that that perked our ears up because it's like okay that's interesting um and then the other conversation we had was basically what's going to happen

to our companies into our industry right and and so it's certainly not the case that all of our companies are going they're certainly not all going fully remote and we actually have quite a few companies that have actually elected to actually stay very office Centric um which is which is actually a very interesting counter programming thing that some people are doing now but you know generally speaking our companies were indicating that they were going to become more flexible and they were going to really start to spread out um and then the industry just felt like it was going to expand and we were seeing you know a lot of Founders who were

frustrated being in the Bay Area you know basically left over this period and they went to other places and they started companies and and so we basically decided like we can't be in the business of partnering with people who are building the future sure if we're not living in the future ourselves and so we basically said we'll just do a hard reset we'll become um you know sort of uh say remote Centric or sort of virtual Centric I just approved a request we converted we we still have our office because it's not a long-term lease uh we converted it to hoteling um and I just signed off yesterday um on converting my former office into the

apparently the new Lounge um so I'm very excited to visit visit visit the the new Hangouts face um and so uh basically what we decided is you know and so basically we're going to keep we're going to keep offices basically as as places for people to go when they need a place to work for basic for teams to be able to meet together we're also actually letting our Founders use our offices more which is actually helping them figure out how to kind of adapt through this um and then we're going to expand basically actually the wework model being ahead of its time we're going to have more

smaller offices and more locations and so we've opened formally in what do we announced so far at least five which are the which ones we announced La Menlo SF Miami New York New York to New York three uh uh I think that's it for the moment yeah and then we'll yeah and we'll we'll have more in the future so we're yeah we're going to accommodate we're we're now we're we're a you know we're we're not a you know we're an investment operation not a product so we don't we don't have like you know assembly lines or software you know kind of you know production so we have a simpler version of the problem but we're letting our teams decide

basically how to distribute so we have some teams that want to be in person we have some teams that want to be remote and I would say I think it's gone so we're doing all that so the way basically the firm runs now is we basically run the firm remote like all the formal meetings are on Zoom everything is kind of equalized um you know kind of that way um but the teams are free to Cluster whenever they want um and then we have a very big focus on two things one is off-sites um and so get you know every team is expected to get together on a frequent basis and we really invest in that um and then a lot more travel and so so I'm traveling you

know I'll I'll my steady state I think is going to be traveling at like 4X the number of days that I used to travel um and you know and all of a sudden right it's even higher impact than it used to be to actually show up someplace and actually be there in person um so for us it feels like a real broadening out of what a firm like ours is capable of doing it feels like a way to basically accommodate scale um because we definitely felt bottlenecked uh you know where we were um and so I I think it's a way to run um you know look I think the Adam's Point like we're feeling our way through it I think a lot like I would say

especially this I've talked to a lot of big company CEOs and I think they're all and I think they would generally agree with this they're all in an intermediate state they're they're all in some hybrid state where they kind of have a lot of vestiges of the old model because they've got the offices they've got and they've got the employees that you know lived in the certain places but they've also they know that they can't go back to the way things used to be so they've all got some hybrid remote virtual thing it's usually a two or three day week thing it's not working really well they've got you know this big question of do they also hire remote employees

because if they do then it brings up the issue to the current employees is why can't they become remote and then they've got you know they basically all have to reinvent all the communication flows all the management systems and then they've got this fundamental question for their people especially all the new hires right and you know we're now we're going to be on five years in here pretty quick and so there's an entire generation of kids coming out of school that are going to work for these companies and they're going to have a different set of both you know expectations and issues and so this is why I think we're still at the beginning

of the change like I think we're three years into it probably a 10-year process and I think the level of reinvention is going to be actually quite staggering from here yeah I think that's right I think we've we've managed through it very well we actually materialize where we need to and have a lot more Face Time you know I think I mean I see you all the time uh outside the office and I think we get much you get much more concentrated focused time together to actually be productive and it's like you know the hallway track is okay at the office but it's a little bit superficial how was your weekend what did you do

when you go to an offsite it's just much more focused and conscientious about what is important to us what went well what are we not doing what do we want to be doing so my takeaway is that when we are together it actually is way more productive you know not that I don't care about your weekend I do care but uh you know it's not as important as talking about the next 10 years of the firm yeah I call this I call this the barbell right so it's it's the because everybody always asks what about the water cooler moments and I'm like God I hated the watercolor moments like I mean like to have to stand there and like talk about the football game like I I

can't I can't I temporary seems like a wonderful guy I can't do this it's very deflating yeah I'm gonna I'm gonna have to I'm gonna have to push back my my partners a little bit okay go ahead um yes please go ahead for an investing firm I accept and I already said you guys are not just investors you're you're partners and businessmen and entrepreneur and it's it's factual I strongly feel and and Mark as to what's important about this conference instead it's important to think a little bit how the future is going to look it's just an opinion I've been in a few offices

I strongly feel that the serendipitous connections those those so the watercolor is boring they're interesting when you're building a company and it's getting exciting and a new idea is coming and the whole team was supposed to go home and it's 8pm and everybody told their husbands their wives and their kids were being there in 30 minutes and then someone went to the bathroom sorry for the example and comes back like I have it and they say this thing that solves the entire problem and everybody gets so excited and before you know it it's 2 am and we just moved the business forward not by a week but by a year and now it's 2 A.M it's very late

everyone's sleeping already well let's go out and grab a drink and now everybody's hanging out and before night you just had one of those nights that's a month that's this moment in the life of a business that then you look back and you say I know that day when it all changed that special piece cannot happen on Zoom I think human potential is in the cloud I believe it but human interaction is happening right here and I actually think if you look 10 years forward the companies that are going to make the effort now to be face to face now we can describe what face-to-face is there are many ways to do it but the companies

that are actually going to do the face-to-face I think when we look back five years maybe even 10 are going to be the winners obviously I agree that the huge ones who don't know what to do with themselves that's an opportunity for incumbents to come but when I'm thinking of startups and new businesses even stronger businesses with my team we're fighting for that face-to-face time and and every time we're together the excuse of having this event brought a few of us together and three things came up about the business is we're thinking about just what we're going to talk about and and I think that's priceless now take that because we agreed that the office

is a challenge bring that back into your home you're back in that multi-family building why not have those connections there why shouldn't you meet here and it makes a lot more sense for me by the way I'll meet my wife or my husband in the apartment building when I went downstairs to the pool than I do in the office so both of those things work really well and from a business point of view I can do business there also and then maybe there should be a co-working space there should be an office and maybe Enterprises are going to look so if Enterprises need to do culture and if culture is not going to be in the office anymore then maybe there's a new hybrid

that has to do with the home put together with an office space then I'll give one more thought that I have I think the fact that you guys have seven offices is the future so I do think it's smaller offices and centers but it's going to be very hard for me to be convinced that not bringing people together and not having human connection is is in our nature I don't think we're built to look at the screen and I think that the one day when we're all much much older and we're second we're on our deathbed and we're looking at ourselves and we have that moment of realization and we say well how much time in my life did I spend with my loved ones with

people I really care about and how much time of my life did I spend in front of a screen if that answer with front of the screen is too big I am not sure how we're gonna feel that second before it's all over look I think we would all agree you have to know what inning you're in sort of what time it is in your company there's definitely moments that matter where you all want to be in a room working together and then we do that we would agree with that for sure um so actually let's talk about Adam you've kept a lot about flow close to the vest give us a little bit about the vision you've given us a little hint

throughout your answers here but what are you what are you really hoping to build uh with flow I actually thought because we were talking so much that I was going to keep it under my vest one more day oh yeah well I thought I was going to get away with it well first of all same reason about keeping it under reverse it's not that we've actually been keeping it under a vest it's that one of the many lessons that that we learned from the past is talk is cheap we just want to build we just wanna it's it's a heavy lift and we just want to get to work so we had no reason to say anything I I met a nice person here earlier today who I think

said something about me when he was talking before and I said you know that's not true what you said it goes but that's what the media said and I was like well I never spoke that's right the media the media is never miscarried against him either he then told me he said you know I'm not sure I buy into flow I said well I never spoke about that either um in a very simple way we want to create an elevated experience for the resident and we want to find a way to share with the resident a portion of the value that they create I'll give that a moment we want to

elevate their experience we talked about the buildings we talked about everything that's happening I actually think I don't think it's an easy job I think it's very hard but I do think the power is low you just make a little more connections you just make it a little bit more real you pay attention to the people running it you maintain it the right way you leverage technology to actually make things work instead of using nine apps use one you do simple things and you elevate the experience but then the more complicated part is you find a way to share a portion of the value and with the resident itself and because and that's the vision

and because we said that it's a majority of the young adults and because Mark said that that's how people so a few numbers behind that for 80 years owning a home used to be the way that that was the majority of us creating a equity and 60 of Americans today in average their equities in the home that is the majority of equity so if we're correct and 70 are renters and that number is only going to go up what were they going to create equity and if they're going to be renters for 10 years 20 years when you go into these apartment buildings and it's true about single family but for today we'll we'll

talk about apartments if you're going to go into these multi-family buildings and you're going to have this disconnected experience that you just said but you're not only going to be there for two years and then get married and move to home you're going to be there for 20. that sounds Soul crushing right and therefore you have to solve both of the sides can I ask myself the next question sure Adam how are you going to solve most of this side that sounds really good but what are you actually got a great great question thank you thank you for that great question and well we have four pillars as we're

looking at the business today we have the first one which is a branded technology first management company that actually runs the buildings we have an asset management or real estate fund or real estate company that actually owns the buildings and something cool about our new business we actually own buildings together already one of the biggest words that Mark and Ben used as I said before was alignment alignment alignment alignment so for perfect alignment we contributed into this business at least as much as as and recent contributed into this business and I'm very excited about it and it's it's amazing to feel like that

and then we have a financial services company so number one management company branded technology first number two real estate Asset Management a company that can buy real estate and asset managed real estate number three financial services and the fourth pillar is this mechanism that's going to take some of the value and share it with the value creators and what we get so excited about the vision of flow and The Business of flow is that it's actually a flywheel if we can actually create a better experience in the building then the building performs better and makes a higher noi if the building makes a higher noi then we'll be able to raise

more money and buy more buildings if we buy more buildings then we'll be able to run more buildings and have more users in those buildings and those users are going to start using our financial services now the reason they're going to use the financial services the first thing you do in buildings is you charge rent every month and that's 35 of their total wallet so that payments company that's charging your rent already has a real relationship with the user if that financial services company is going to do what we wanted to do and create services that are actually meaningful recall where you think of it as Financial wellness and give services

that are actually meaningful then that again is going to drive more users and then if we are able to take this value creating mechanism and share with the residents a portion of the value it's going to make them feel ownership and it's not just ownership I feel like I'm part of something it's I actually own part of something and again the word ownership is a very complicated word especially in this place but if there is perceived value and if that value appreciates over time then I feel like I'm part of a community and a very funny example that we like to give is if you're in your apartment building and you're a renter and your

toilet gets clogged you call the super if you're in your own apartment and you're and you bought it and you own it and your toilet gets clogged you take the plunger and it's it's the difference when feeling like you own something to just feeling like you're renting from being trans transactional to actually being part of a community and our vision is to bring it all together and just one more example of just to put it into numbers average churn in a property Management's average churn in multi-family in this country is 50 it means the user stays in average for two years if the user now enjoys their experience

more and feels like they have a portion of the value and chooses to stay a little longer and that average turn goes down from 50 percent to 40 percent without getting too deep into the numbers the noi of the building will go up by approximately five percent which increases the returns of the building for those LPS for the investors by 500 basis points which in real estate is an unheard of number and by tackling this challenge vertically is what flow is planning to do and as I said we're just getting started excellent I'm going to wrap this up with one with a sort of common question for both of you are there any model cities that are sort

of doing this right from a regulatory standpoint from a building standpoint from a community neighborhood standpoint and then part two is sort of what role does government have to play uh in sort of facilitating and improving either you know Home Building homeowner ownership and all these components so we'll start with with Mark Mark yeah well look cities were stern-ups at one point right like so every city was a startup um and you know there you there's like incredible stories if you go back far enough like creation of cities like Los Angeles or Washington DC you know for that matter um you know in the in the 20th century

that kind of went at least in the in the west that kind of went out of fashion became sort of an intractable thing to try to do you know there were some entrepreneurs who thought hard about it and gave shots at it so Walt Disney right had a whole you know Walt Disney had a whole Vision um you know what you know the Disney company to this day has these you know planned communities that kind of come from that uh you know Walt Disney actually had this vision for they actually have this thing um called the Epcot um experimental prototype city of tomorrow um and stayed in the museum in San

Francisco if you go to the museum you can see it oh is that right okay the whole thing well they still I think they still have the Epcot what the part of Epcot that got built I think is still in in Florida so you can go visit I think the remnants of Epcot so um you know this is like this is like sort of futurism from the 60s you know kind of in in in Disney's mind and he wasn't able to get he passed away he wasn't able to fully develop Epcot but he he was he was kind of reaching in this direction uh towards the end of his career and then you know there are other examples in the U.S you know it's probably um what is it Irvine

um you know took a big swing at this um and actually it was has been very successful and then um you know Venice uh Kimmy you know sort of you know created the you know La created the Venice canals as a sort of a plan commute so you know there there are various ideas like this it's been a long time since somebody's really taken a hard swing and and so basically what you have you know basically what you have are Legacy systems you've just got this sort of entrenched you know complicated power you know kind of system local homeowners I mean it almost seems deterministic that if a city becomes successful it

basically the local homeownership whatever political base devotes itself to preventing the construction new housing and it seems like a real a real trap so I'll add to what Mark is saying but if a city was a business and it's an old business and it's 30 years old then they're going to say forget that business we're going to start a new one we're going to fund it we're going to start it and we're gonna and we're gonna take over the problem with cities they're built so to go into a city now and change let's just start with something very simple most of the city is concrete and roads where cars are driving as and there's so many new

Solutions and you can really talk today about what's happening and anybody who knows New York City and so when Uber was getting bigger and bigger how the yellow taxes started disappearing was an unbelievable experience and how the medallions that used to cost a million three suddenly so it's it is a very challenging thing to actually reimagine a city when it's already built and there's things you can do it when you look at these buildings there's single standing Villages yes a building with 400 apartments we can reimagine what happens inside of it but reimagining a city is a big is a big gay undertaking and actually one of the only places

actually in Saudi Arabia where I know some of the team members were just there they're actually going for it so there are places in the world right now and and it's very Innovative and it's very impressive that they're doing it that they that people are actually trying to build new cities but the answer to that and sort of how government can help there are technology companies right now construction companies there there are different things there's there's a construction company here called icon that's using technology that the government is going to need to partner with them at some point because they have found ways to build a home in four

days that used to take that used to take a year and a half and as you can do more and more of those things what we're gonna do is I believe through Innovative Technologies be able to build it fast enough to give people the courage to go and build a new but to go into the old ones is very hard a crazy idea is the office now everything that's happening in office can you go and convert some of these dead offices into some of your dish you could think about that and I think the role of government has always been very important for this country I think for us that flow and this is another lesson from the past we used to think and I used to think we had

to own everything I think the category is so big that the only way we're going to achieve anything is through a partnership partnership with government partnership with current players and partnership with new players that are going to come and I think it's the only way to solve this problem and I'll finish by saying that I actually think the housing crisis that we described might be one of the biggest challenges that the US is facing today but the reason it's hard to understand it it's because if you really want to get it it's five to ten years down the road the problem with housing it takes five to ten years and Mark I agree with your