As has been noted here at the Reach a number of times, we don’t live in a normal world anymore. We live in Clown World – or, for those of you who like to measure things in Serlings, The Twilight Zone – where that which is “normal” happens increasingly rarely.

One of the things most badly affected by living in Clown World, of course, is the ability to measure the true value of a company based on its products, because the old sensible rules for assigning a dollar value to a company’s profits simply go straight down the shitter:

The story behind WeWork is similar to the story behind other spectacular Shrillennial-funded flame-outs. The one that comes most easily to mind, of course, is Theranos.

In both cases, the CEOs behind these companies were charismatic, calculating, and quite likely sociopathic Millennials.

In the case of Elizabeth Holmes, the label of “sociopath” is, in my personal opinion of course, readily applicable. Ms Holmes deliberately and intentionally misled investors, her own star-studded board of directors, and her employees, into believing that the technology that she was touting was real and did work. She meticulously crafted an image and a persona designed specifically to replicate the aesthetic favoured by Steve Jobs of Apple, and carefully cultivated a number of very powerful backers with boatloads of money and plenty of influence to make it look as though she simply couldn’t fail.

But she did fail. And her failure wiped out a company that at one point had been worth at least $10 BILLION, and reduced her own personal fortune down to, basically, zero.

What Adam Neumann of WeWork did, however, was far, far worse.

It so happens that I subscribe to Simon Black’s Sovereign Man daily newsletter – if you’ve never read his work, go check out what he has to say if you are interested in establishing yourself as a financially and geographically independent man of means.

Simon has had absolutely horrid things to say about (((Adam Neumann))), the now-former CEO and Chairman of WeWork. Here is what he wrote in one of his emails to his subscribers a while back:

The company is the poster boy for the hot co-working trend. And it’s worth around $40 billion today. [This was back in mid-September.] Of course, it’s also losing billions of dollars.

WeWork’s value is far more than any other company of its size because WeWork is a “cool, tech” company. But, at its core, it’s just another real estate play…

WeWork signs long-term leases for office space around the world, then turns around and provides very short-term leases to companies.

Simon went on to point out the same thing in his note that the Bloomberg video did, about that company that used to be called Regus.

If you were watching TV back in the late 2000s or thereabouts (like I did), then you will recall the ads for Regus offices. They were basically offices that you could rent short-term and run your business out of it without being tied down to a long-term lease.

This is great for businesses that are small and growing rapidly, but don’t have a whole lot of cash on hand. It provides them with tremendous flexibility.

But it exposes the business that provides those short-term leases to IMMENSE risk. It’s not hard to figure out why. Basically, Regus and businesses like it will enter into long-term leases with the property developers of specific buildings, and they have to front a LOT of cash to do so. And they also need to have steady, regular, predictable cashflows in order to ensure that those lease payments are paid off in time.

Inevitably, when your revenue comes in the form of short-term cash payments from small clients that may or may not renew their leases after a few months, but your costs come in the form of multi-year leases to developers that require and demand regular cash payments on a highly predictable schedule, well, you have a BIG problem.

But that problem is not impossible to overcome. With smart financial management, careful husbanding of resources, proper stewarding of cash in the bank, and very careful due diligence done on the leases, combined with keeping the costs of cleaning and maintaining those short-term offices low while still maintaining a clean and attractive environment…

Well, it can be done. Regus proved quite well that it could be done. They were, and are in their current form, a profitable company with plenty of cash in the bank.

WeWork was precisely NONE of those things.

It was not low-cost; keeping Shrillennials happy with branded coffee and funky workspaces and beanbag chairs and free food and all of the other assorted stupid shit that they need on a daily basis is EXPENSIVE.

It was not profitable; WeWork was losing bucket-loads of money every quarter and every year, burning through vast amounts of cash at very high speed.

And it was not well-managed, as the resulting train-wreck has shown.

What happened, exactly?

That is for people with more information than mine own good self to tell you. What I can say, based on some – not much – experience with investing in stocks and figuring out how to value companies, is that an environment of extremely easy money made it very simple for supremely skilled bullshitters like Mr. (((Neumann))) to come to America and sell people on a story that really had nothing behind it.

And I can tell you, based on past experience, that this trend is going to get much, much worse.

The Millennial generation is coming to the fore as the predominant entrepreneurial and managerial class – not because there is anything especially entrepreneurial about them, and not because most of them are particularly skilled managers, but simply because the older generations of Boomers are dying out, and the Gen-Xers who replaced them are getting on toward retirement age anyway. The oldest Millennials are now nearing the age of 40, whereas the oldest Gen-Xers are now in their early- to mid-fifties, and the youngest Boomers are well into retirement age.

Given what we have already seen of the way that Millennials value feelings over facts, “social justice” over merit, and ideology over reality, and combining this with the inevitable bubbles and manias that happen whenever easy money floods a financial system, we have a recipe for disaster.

Millennial managers and risk-takers are going to be given money that they have no idea how to steward responsibly. And when things go wrong – as they inevitably will – they will not have a clue how to fix their own messes, because in their minds they haven’t messed up at all.

How do you keep any sort of sensible understanding of value in a frothy and inflated stock market given these conditions?

Well, pay attention to the fundamentals. If a company has a massive market cap but keeps burning through money and doesn’t make a profit, and doesn’t have any real cash in the bank, then it’s a hype job. Don’t invest in it.

There are plenty of such companies out there. Netflix is the perfect example. This company is profitable, and I use its products pretty regularly. But it burns through staggering amounts of cash every year, and honestly I’m not really convinced that it’s worth the money. I don’t think the content is so amazing that it really deserves the cash burn, even though I use Netflix every day.

In the end, if a story seems too good to be true, it almost certainly is. And if that story is being told by a Shrillennial who oozes charm and confidence – and therefore sets off your bullshit radar as a sociopath – then run, don’t walk, the hell away from it.