How did WeWork get where it is today? Two key things happened: First, a very wealthy investor wanted to believe that WeWork would make him even wealthier.? And second, WeWork's CEO at the time was a great enough salesperson to talk billions out of that investor's pocket

The someone with money was Masayoshi Son, CEO of venture capital firm, Softbank. And the world-class salesperson was Adam Neumann, co-founder and ex-CEO of WeWork. Personally and through his Vision Fund, Son invested about $9 billion in WeWork -- most recently at a valuation of $47 billion in January, according to the Wall Street Journal.

But that value is history. WeWork -- which grew revenue by 100 percent to $1.5 billion while burning through $1.4 billion in cash with enough left to last until mid-November -- has lost 93 percent of its peak private market valuation.

On October 23, Son announced that Softbank would buy back about $3 billion worth of WeWork stock from Neumann, other investors, and employees at a valuation of $8 billion, noted the Journal. 

It gets worse. Softbank intends to raise its bet on WeWork to more than twice the office space leaser's value. That's because Son's fund will now invest $1.5 billion more in WeWork (which it had originally intended to do in 2020) and lend it another $5 billion, noted the Journal, bringing Softbank's total debt and equity in WeWork to a mind-boggling $18.5 billion.

Rather than being punished for the precipitous destruction of value, Softbank rewarded Neumann -- paying him $1 billion in cash for his shares, lending him $500 million so he can repay a loan from JPMorgan, and inking with him a $185 million consulting contract. 

Let's take a closer look at how those two things happened.

How did Adam Neumann make Son believe?

The 6-foot-5 Neumann is an outstanding salesman. He embodied the startup founder that investors crave. "He is intensely ambitious and a masterful storyteller with a magnetic personality who can inspire and sell," according to the Journal.

Neumann and co-founder Miguel McKelvey started a small co-working space -- they took out a long-term lease on an office, renovated it, and subleased smaller desks -- as a side business during the recession following the financial crisis and "were amazed by the demand."

Neumann's pitch for money -- he was bringing to life "a new way of work to a changing world" which included a mobile app that would "facilitate a physical social network".-- was effective. Joey Low, whose Star Farm Ventures made its first WeWork investment in 2013, told the Journal, "When I met him, after a couple of minutes, I wanted to invest."

In 2016, Son met Neumann in India. Son and Neumann shared a love of taking big risks. SoftBank first committed $3.1 billion in new funding to WeWork in 2017. "Neumann has told others that Son appreciated how he was crazy--but thought that he needed to be crazier," according to the Journal.

Why did Masayoshi Son want to believe in WeWork?

Softbank has so much capital to invest -- its Vision Fund manages $100 billion -- that the money is burning a hole in Son's pocket. To spend the money, Softbank has devised an investment strategy that defies logic: pour billions into companies that grow big fast by selling services to huge markets at prices that are well-below their costs.

This defies logic because when such a company goes public, it can't grow profitably. So those who invest in the IPO are left with stock that falls fast. For example, Softbank invested about $7.7 billion in Uber -- helping to create a money-losing company whose growth has slowed down to a mere 19 percent in the first half of 2019 while losing a whopping $6.2 billion on $5.4 billion in sales. Uber's stock price has tumbled 21 percent since its May IPO and Softbank is expected to lose $3.5 billion on its Uber stake, according to Forbes

Softbank was thinking that the bigger its vision for the company, the more capital it could commit to WeWork. And the more capital Softbank invested, the bigger its gains would be when the company went public. So by crazy, I am guessing Son wanted Neumann to offer more money-losing services targeting other huge markets.

But investors saw through Neumann's reality distortion field. They rejected a grossly over-valued, cash burning commercial real estate leasing company and an overpaid CEO whose control of the company meant he could not be replaced by the board if the company's performance got worse. 

Startup investor Ben Gordon, who heads Cambridge Capital, offered a warning for investors: Beware of people like Steve Jobs whose "reality distortion fields [enable them] to convince people to change their minds based on ...charisma rather than the facts." In the case of WeWork that goes for Neumann and Son.