Dumb & Dumber — WeWork 2.0? And About Those Student Loans…
Thanks for stopping by Wells $treet, where we talk money. Sometimes we talk about stupid money in my recurring column, “Dumb & Dumber.” My goal is to highlight misguided behavior so that we can steer clear of it in our own financial lives. You don’t have to thank me… Okay, thank me.
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DUMB — Adam Neumann is Back!
WeWork’s Adam Neumann just landed a ginormous investment for what you might call WeWork 2.0!
“Yes, yessss!!” Adam Neumann in Los Angeles in 2019/Michael Kovac/Getty Images
Neumann famously overspent at WeWork and nearly destroyed the company, but that is so pre-Covid. Now he’s launched a startup called Flow. While we don’t know a lot of details, it sounds like Flow will do for apartment buildings what WeWork did for work spaces — create a community with some cool amenities. Neumann hopes to cash in on the rise of remote work.
It worked out so well the first time, why not try again? Billionaire Marc Andreessen loves the idea so much that he’s written his biggest investment check ever, $350 million, to help Flow get flowing.
Fool me once, shame on you. Fool me twice with a startup that wants to turn a bland real estate concept into a lifestyle — and, well, shame on me.
Added bonus, Forbes says Flow will also create a digital wallet to store crypto. Of course it will.
Forbes notes that Flow sounds a lot like another startup called Alfred… which Neumann invested in a few years ago and now may be copying. Neumann’s spokesman denies this.
Andreessen is no dummy, but will someone get Jared Leto and Anne Hathaway on the phone, STAT?! #WeCrashedSequel
DUMBER — Banning Djokovic is ”a Joke”
You may disagree with Novak Djokovic’s decision not to get vaccinated. I do, and he made my D&D list in January for not being forthright about his travel activities leading up to the Australian Open.
But now it’s August 2022. Not 2021, and certainly not 2020.
Novak Djokovic as runner-up at last year’s U.S. Open/Matthew Stockman/Getty Images
Djokovic is a healthy 35 year old at the top of his game who’s told authorities he’s already had Covid twice. Yet one of the greatest tennis players of all time — perhaps the greatest — is barred from the U.S. Open because of his vaccination status.
Dr. Vinay Prasad says this decision makes no scientific sense. Dr. Prasad is a medical school professor of epidemiology and biostatistics at the University of California, San Francisco, and he points out the tennis organization’s hypocrisy: Even as Djokovic is banned, fans in the grandstands don’t have to show proof of vaccination (fault); the event is outdoors (double fault); and Djokovic played in the Open last year when the Delta variant was more serious than the variant du jour (uh, triple fault. Yeah, I know).
Djokovic has lost a lot of money because of his stance, and Rafael Nadal should send him a thank-you note for being forced out of the Australian Open. But why is Djokovic still being punished? As John McEnroe told reporters this week when the Open opened, “I think it’s a joke if he’s not allowed to participate here.”
Correction: Djokovic is being barred from entering the U.S. because of federal rules banning nearly all unvaccinated travelers from entering the country. This is not a decision made by the U.S. Tennis Association.
DUMBERER — Will the IRS Really Collect Billions More in Taxes?
I’m all for enforcing tax laws equitably. But if you believe the $80 billion going to the IRS to hire 87,000 new agents is going to bring in an extra $400 billion over the next decade, then pour yourself a tall one, sit back, and read on.
Past performance is not a promising predictor of future returns. For example, there’s the 2010 Foreign Account Tax Compliance Act (FATCA). According to the IRS watchdog at the Treasury Department, the tax agency has spent nearly $600 million enforcing FATCA since its inception, with expectations that the stepped-up enforcement would yield nearly $9 billion in extra tax money by 2020. Instead, agents only recovered $14 million. Million, not billion. Hold on, I’m dividing 600 by 14, and… that’s about $42 spent for every $1 recovered.
Dumbererer — Billions to Remodel Penn Station
The State of New York plans to spend $7 billion to remodel Manhattan’s worn down Penn station at a time when no one is returning to work in the Big Apple. Twenty percent of office space in Manhattan is vacant, according to Politico.
Grand Central it ain’t. Penn Station on July 2, 2022/VIEW press, Getty Images
Yet the New York Times reports that plans are moving ahead with the renovation, and at least part of the cost will be covered by developers who’ll build 10 towering high rises around the transit center. The complex will eventually add 18 million square feet of new office space. Did I mention that workers are not returning to the office in NYC? In a logic-defying financial twist that you’d only expect in New York, the developers — in exchange for helping fund the Penn makeover — won’t have to pay property taxes on their huge new towers.
If you build a skyscraper in the forest, can anyone hear taxpayers scream?
Quick hits:
— Was Elon Saved by the Whistleblower?
Twitter may want to rethink its legal dispute with Elon Musk, who has reportedly sent a subpoena to Peiter “Mudge” Zatko, the ex-head of Twitter security. (BTW, I looked up “Mudge” to see if it’s a word. It is.)
Zatko told authorities this month that the social media company misled the public and federal regulators about the strength of its defenses against hackers and spam accounts. Twitter denies the allegations, but the world’s richest man may have just gotten a lifeline worth $44 billion, but only if a) the whistleblower’s claims are true, and b) the judge allows Elon to tweak his lawsuit to include them.
Peiter Zatko/Matt McClain, The Washington Post
— Crime Forces Retailer to Ban Masks
Back in a simpler time, wearing a mask inside a store meant you were there to rob it. Everything old is new again! Covid is now killing fewer people, but rampant crime in California is killing business. So high-end retailer Kitson is banning customers from wearing masks inside its flagship Los Angeles store.
— Missouri Pastor Whines, “I’m not worth your Red Lobster money?”
A TikTok video shows Kansas City pastor Carlton Funderburke going off on his congregation for not buying him an expensive Movado watch. “That’s how I know you’re poor, broke, busted and disgusted, because of how you’ve been honoring me,” he shouts from the pulpit.
JESUS TAKE THE WHEEL!
Funderburke has since apologized. “I’ve spoken to those I am accountable to and have received their correction and instruction,” he says in a video posted on the church’s Facebook page. “I have also privately apologized to our church, who has extended their love and support to me.”
— Fraudster Invokes the Name of Tom Brady, Goes to Prison
It sounds genius, in an evil way: Buy the Super Bowl LI ring of an unnamed New England Patriots player, pay for it with a bad check, then immediately resell it for over $60k.
Not only did 25-year-old Scott Spina admit to doing this, he also obtained information about the player’s allotment for more rings to give to family members. So he grabbed three of those extra rings and had “Brady” engraved on them, then passed them off as belonging to Tom Brady. One sold at auction for over $300,000.
It was genius, and evil, and it fell apart. You can’t outmaneuver the GOAT or the long arm of the law, and now Spina will spend three years in federal prison after pleading guilty to fraud and aggravated identity theft. Spina also has to pay the unnamed Patriots player $63,000 in restitution.
Don’t mess with the GOAT/Focus on Sport, Getty Images
Dumbest — The Nationalization of Student Loans
I’m not here to argue whether forgiving student loan debts will add to inflation or set a bad example or … you know.
No, the dumbest thing about the whole enchilada is that politicians took over the student loan program in 2010. As Felix Salmon lays out in Axios, the government has a lot more money to lose than private lenders do, and elected officials can get away with writing it off. As a result, by nationalizing student loans, “A federal lending program that was sold as generating $113 billion of income for the federal government is now likely to end up costing the government well over $500 billion,” Salmon reports. Yes, it will cost “the government“ a half TRILLION dollars. (FYI, “the government” is you.)
SOMETHING WONDERFUL! Football Moms and Icelandic Horses
For all the dumbness out there, I believe there’s an equal amount of joy.
So here are two things to make you laugh.
First, moms recently attended football practice at Washington High School in Washington, Illinois, to learn about the game… and to tackle their sons. Kurt Pegler, sports director for KMBD-TV, posted this video, which has been seen about 5 million times. Watch ‘til the end.
And finally, the best idea yet for handling email when you’re on vacation? Outhorse it. Tourism officials in Iceland have started a program where Icelandic ponies will “answer” your email while you vacation there. The video will make your day. As if we needed another reason to love Iceland (other than its role in the 2008 financial collapse, but I’ve moved on, sorta).
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Cover image: Jared Leto and Anne Hathaway as Adam and Rebekah Neumann in “WeCrashed”/AppleTV+