Understanding Adam Neumann's FLOW
Marc Andreessen believes we have a five year window to redefine work.
What is the biggest asset class ready to be disrupted? I’ve give you some hints:
The users are currently getting a terrible experience.
The users are spending a huge percentage of their take home pay on it each month.
This little thing called Covid changed everything about remote work.
The asset class is multi-family residental buildings and renters. To put some numbers on this 70% of young adults are renters and that huge percentage is 33 percent! Everything else in their lives that they spend 1% or 2% on (think their iPhone or morning Starbucks) is branded and the experience is excellent. And if it’s not excellent someone comes along with a better brand and makes it excellent.
But why not their apartment building? The short answers is: all the buildings are full anyway and the landlords didn’t have to. And the longer answer has to do with that “What is the 3rd place?” question Howard Schultz posed about life. Your home, your office, and… where is your Central Perk hang spot?
According to Marc Andreessen (all this info comes from an interview he did with Adam recently, you’ll find it at the end of this post) we have to think about it this way:
It all started with going to college. You’re an “adult” but not really a full adult yet so you live on this campus with everything you need to learn how to be that full adult. A large group of other people your age (friends, dating pool), some full adults teaching you and guiding you on your way; in short you have a good chance to find your social scene and balance it with work.
Then google comes along with this idea that after college, you should still be on a campus with everything you need. Once again you are surrounded with people your age (friends, dating pool) and everything you need to find your social scene and balance it with work.
And BOOM in March 2020 Covid blows up this whole system. Now you are stuck in your one bedroom or studio apartment with nothing but Doordash and Tinder and that is “not a good life.”
So it turns out the 3rd place is also the 1st place: your home. The google campus needs to move into apartment buildings and give young adults what they had before: being surrounded with people their age (friends, dating pool) and stop this isolation remote work has caused.
And “super star” cities (Bay Area, Los Angeles, New York, Miami, Paris, etc.) are all full. But do young people need to move to big cities anymore for opportunity? Maybe not. This what Andreessen means by a five year window. We have a five year window to redefine where work happens. And pretty much everyone knows, it’s never going back to pre-covid full time in the office.
So what has Adam Neumann done so far? Well after WeWork he took some time to think about everything but then got back into investing with his family office and bought 4,000 multi-family apartment buildings in many different cities. And he’s not unhappy with the investment. The buildings are making money. But the experience the renter is getting is not good. So he agrees to put the 4,000 buildings into this new entity called FLOW and Andreessen invests $350 million and they are now building four things:
A branded technology first apartment management company with a super cool iPhone and Android app that every tenant uses for all their needs.
An company to hold and own the actual buildings.
A financial services company to take 33% of these renter’s take home pay but also suggest other things they might need.
A new system to let a portion of rent paid build equity and ownership in the building for the renter.
Item number 4 is a big one and he didn’t go into too much detail in the interview on how this will work but it’s obviously needed. If young adults are not going to buy homes anymore and just rent, we have to give them more value for their rent checks vs. 100% of it going away. Even if just 99% goes to rent but 1% goes to building a sense of ownership that’s a game changer.
Neumann paints this really interesting picture of the experience of touring an apartment building today. You meet the “leasing agent” and they show you around. The pool, the gym, etc. And no one is ever using the pool or gym (they are sittings alone in their unit on a zoom call ordering DoorDash and using Tinder, ugh.) But in a FLOW building he wants this very subtle difference. You are shown around and meet current tenants and let THEM sell you on why this building is great and possibly a fit for you.
In short, landlords, you need to change. Disruption is coming for this huge asset class you’ve been collecting for years. Adam mentions at the end of the interview the problem is so big FLOW can’t do it all and wants to partner with many different players.
So I registered the domain remoterenters.com and put up the start of a little app. You’ll find the video interview on the homepage there. The google campus is moving! And it’s moving into your home.