Tech's Limitations in Disrupting Traditional Industries: A Reflection on WeWork's Rise and Fall

The recent bankruptcy of the co-working space operator WeWork in the US spelled the end to a rather embarrassing saga in the world of tech. Under its flamboyant founder, the firm was once deemed a tech darling ready to disrupt the fossilized world of real estate management. For a while, it seems to have succeeded, offering up rental spaces to other tech startups hoping to bask in the glow of how tech can be utilized to solve legacy industries. Getting other tech firms to believe that it is an integral member of the tech world propelled WeWork to new heights in valuation.

Eventually, the truth had to come out. WeWork, at its heart, differs little from other short-term office rental firms in its business model. Its only differentiating factor, savvy investors eventually caught on, was its marketing prowess. Combining the charisma of the founder and its clever hyping up of how it can use tech to change the world (a dubious and vague proposition from the very beginning of the firm) allowed it to get plenty of venture capital investments before crashing to the ground. Plenty of losses to the investors had to come before its portfolio of rather ordinary assets had to be restructured in ordinary ways.

The cautionary tale of WeWork's rise and fall is a cause of reflection: just how viable is the proposition of tech making a non-tech sector sexy and valuable? Real estate is full of dinosaurs leveraging multigenerational land ownership and collusion with landowners, private and public. But that long history of operations means that it is particularly difficult for tech firms like WeWork to fundamentally change how the business is done. The question is whether other non-tech sectors, without the historical baggage of real estate, are easier for tech to disrupt.

Here, the higher education sector may be worth examining. Granted, institutions of higher education can be just as fossilized as their real estate counterparts. Universities are sometimes older than the oldest of still-existing real estate firms. But the idea of "preparing" for higher education applications is a much more recent concept. In the olden days, top colleges were exclusive to the offspring of the elite: normal folks had no way of knowing, paying for, and applying for education there, even if they somehow became eligible for social status. The combination of old and new could be something that tech finds a niche.

But the prerequisite for disruption comes from the attractiveness of a "new way of doing things." Real estate is based on human relationships among landowners, estate managers, and clients. That personal nature of the business is fundamentally non-tech. Education is still grounded in relationships among students, teachers, and admission officers. So at first sight it is not promising. But the idea of bringing the human aspect online, enabling someone to be taught anytime by anyone anywhere, is tech. The ubiquity of location is certainly not something real estate can replicate.

That temporal and locational flexibility may be a key to tech disrupting certain non-tech industries and not others. Some industries that have a distinct offline aspect, including logistics, delivery, and hoteling, have seen the emergence of pivotal online players precisely because while the end services are offline, service providers and clients are willing to communicate and organize the content of services to be provided entirely online. That sort of flexibility allows tech to find their valuable niche of making traditional services more time- and cost-efficient.

It remains to be seen whether the same flexibility can apply to real estate and education. Sure, some clients and service providers are willing to communicate online, just as they would to secure any other service today. But at the heart of these two industries lie exclusively offline presence in the form of land and the universities sitting on top of it. Unless online transactions (say, through the metaverse) and online schooling become a social norm, there remains a long way to go before the offline presence becomes both socially and economically obsolete.

It is worth remembering that the end of WeWork has not meant the end of its dream to disrupt the real estate industry. Plenty of WeWork-esque firms emerged, with some doing fairly well by not being so flamboyant, growth-seeking, and globe-spanning. Perhaps the issue of WeWork is less about what it did but how much attention it attracted, ultimately alleviating the business partners that it needed to survive and thrive. The failure to maintain good human relationships can bring about a quick downfall. This is a lesson that is pertinent for both tech and non-tech firms.