Monthly Archives: February 2018

Co-Working – Update

In my first post on this subject, dated 1/2015, copied below, I said “This field is going to explode”.

Today’s Sunday Times published a major article on WeWork, which confirmed my suspicion.

JCR notes:
– they have 200,000 members
– they are in 20 countries
– revenue this year should to $2.3 billion
– apparently, he has convinced investors, including SoftBank and Benchmark, that it deserves a valuation around $20 billion, more than 10x IWG, its publicly traded competitor.
– they have started WeLive, its residential offering, and Rise, its gym.
– they acquired Meetup, the social network that facilitates in-person gatherings, and the Flatiron School, a coding academy.
– they bought the iconic Lord & Taylor building on Fifth Avenue in Manhattan, which is being transformed into the company’s new headquarters.
– SoftBank, the Japanese technology group led by the enigmatic billionaire Masayoshi Son, recently invested $4 billion
– in plans: WeGrow, the company’s for-profit elementary school, set to open in September.
– IWG,IWG, better known as Regus, has been around for decades. It is a publicly traded co-working company that has more members and more real estate than WeWork. IWG is valued at just $2 billion. Yet Mr. Neumann has convinced investors that WeWork is worth 10 times that figure.

Here it the article:

CREDIT: Sunday New York Times article on WeWork

The WeWork Manifesto: First, Office Space. Next, the World.

The brash, ambitious founders of WeWork, a global network of shared office spaces, want nothing less than to transform the way we work, live and play.

By DAVID GELLES
FEB. 17, 2018

On a cold February morning at the Brooklyn Navy Yard, the skeleton of a modern 15-story building was rising from a muddy construction site along the East River. As long and as tall as a cruise ship, the sleek glass structure loomed above rusty, century-old dry docks, serving notice to the industrial neighborhood that the new economy was coming.
The project, known as Dock 72, is the brainchild of WeWork, the fast-growing New York start-up valued at a whopping $20 billion. In just eight years, WeWork has built a network of 212 shared working spaces around the globe. But WeWork’s chief executive and co-founder, Adam Neumann, isn’t content to just lease out communal offices. Mr. Neumann — a lanky, longhaired 38-year-old Israeli — wants nothing less than to radically transform the way we work, live and play.

When Dock 72 is completed this year, if the aggressive timeline holds, it will represent the fullest expression of Mr. Neumann’s expansive vision to date. There will be an enormous co-working space, a luxury spa and large offices, for other companies like IBM and Verizon, that are designed and run by WeWork. There will be a juice bar, a real bar, a gym with a boxing studio, an outdoor basketball court and panoramic vistas of Manhattan. There will be restaurants and maybe even dry cleaning services and a barbershop.

It will be the kind of place you never have to leave until you need to go to sleep — and if Mr. Neumann has his way, you’ll sleep at one of the apartments he is renting nearby.

It’s an all-encompassing sort of ambition, and Mr. Neumann is the brash and idealistic pitchman. Simply by encouraging strangers to share a beer at the office, he argues, WeWork can heal our fractured society.

“How do you change the world?” Mr. Neumann asked in a recent interview. “Bring people together. Where is the easiest big place to bring people together? In the work environment.”

It may sound simplistic, but around the globe, companies are buying whatever it is that Mr. Neumann and his co-founder, Miguel McKelvey, are selling. WeWork has rapidly expanded to 20 countries, assembled a formidable executive team and attracted some 200,000 members. Big companies like JPMorgan Chase and Siemens are signing on as tenants, and revenues are growing fast, expected to top $2.3 billion this year.

WeWork last year bought the iconic Lord & Taylor building on Fifth Avenue in Manhattan, which is being transformed into the company’s new headquarters. That deal was made possible in part by a recent $4.4 billion investment from SoftBank, the Japanese technology group led by the enigmatic billionaire Masayoshi Son.

Already the company has started WeLive, its residential offering, and Rise, its gym. It acquired Meetup, the social network that facilitates in-person gatherings, and the Flatiron School, a coding academy. Still to come: WeGrow, the company’s for-profit elementary school, set to open in September. WeWork has even invested in plans to create giant wave pools for inland surfing.

A company ostensibly about co-working now employs yoga instructors, architects, teachers, environmental scientists, software engineers, molecular biologists and social psychologists.

Is it all a bit much for a young company still trying to build out its core business? “I’ve made that argument,” said Bruce Dunlevie, a WeWork board member and partner at the venture capital firm Benchmark. But, he said, “great entrepreneurs like Adam don’t listen to guys like me.”

As WeWork expands in all directions, it faces persistent questions about its rich valuation and the durability of its business model. Critics argue that the company does little more than corporate real estate arbitrage — leasing a space, spiffing it up, then subleasing it out to other tenants. The company owns hardly any properties, giving it precious few hard assets. Its growth projections strike many as unattainable, and it has missed expectations before. A number of upstarts loom as potential competitors, seeking to replicate WeWork’s success. And many WeWork tenants are unproven start-ups that could quickly fold.

IWG, a publicly traded co-working company that has more members and more real estate than WeWork, is valued at just $2 billion. Yet Mr. Neumann has convinced investors that WeWork is worth 10 times that figure.

“Adam’s explanation for the valuation of WeWork speaks for itself,” said Chris Kelly, co-founder and president of Convene, a company that offers flexible event spaces and is backed by major real estate firms. “This is not an Excel spreadsheet calculation. He believes there’s an energy behind the brand, and he’s gotten people to invest at that valuation. He has not tried to explain it in traditional financial terms.”

Indeed, to assess WeWork by conventional metrics is to miss the point, according to Mr. Neumann. WeWork isn’t really a real estate company. It’s a state of consciousness, he argues, a generation of interconnected emotionally intelligent entrepreneurs. And Mr. Neumann, with his combination of inspiration and chutzpah, wants to transform not just the way we work and live, but the very world we live in.

It’s an audacious, perhaps delusional plan for a company that made its mark by building communal desks and providing refreshments. And so far, it seems to be working.

Mr. Son, WeWork’s largest investor, is betting that the company will grow exponentially in the years to come, making his multibillion-dollar investment a veritable bargain.
“Make it 10 times bigger than your original plan,” Mr. Son told Forbes late last year. “If you think in that manner, the valuation is cheap. It can be worth a few hundred billion dollars.”

Close Communities
The notion that white-collar workers might actually like their offices is a relatively new one. From the countinghouses of industrial England to the skyscrapers of 1980s Manhattan, offices were mostly uninspiring places designed to maximize space, often with row upon row of unglamorous desks.

“The only kind of model that anyone had for laying out a large workplace was a factory,” said Nikil Saval, author of “Cubed: A Secret History of the Workplace.” “So the office was made to resemble an assembly line.”

This dreary state of affairs began to change in earnest, at least for some, during the dot-com bubble. Tech companies built playful offices with beanbags and Ping-Pong tables, making work spaces less formal. Free food became commonplace.

Raised expectations for amenities and interior design gradually seeped into the mainstream, and today, more and more employees — especially millennials — expect enlightened, unconventional offices.

Enter WeWork. With people bouncing between employers, jobs concentrated in cities and technology making it easier to work remotely, the demand for co-working was suddenly real, and ready to be monetized. Mr. Neumann, who grew up on a kibbutz in Israel, had an epiphany: Bring the communal vibe to the office.

Soon he and a friend — Mr. McKelvey, an equally tall Oregonian who grew up on a collective and was working as an architect — founded an eco-friendly co-working space in Brooklyn. They sold it, but they quickly turned around and started WeWork in 2010.
“Me and Miguel have this common ground,” Mr. Neumann said. “We both grew up in very close communities.”

WeWork didn’t invent co-working spaces, of course. IWG, better known as Regus, has been around for decades. But Mr. Neumann and Mr. McKelvey quickly hit upon a recipe that drew throngs of start-ups: an industrial chic aesthetic, some big common areas with comfy couches, free beer and piped-in pop music.

Individuals pay as little as $45 a month for occasional access to a desk in a common area. Start-ups can pay a few thousand dollars for a private room on a month-to-month basis, and some big companies pay millions of dollars a year for spaces that hold thousands of employees over multiple locations.

It’s a formula that has caught on from New York to Tel Aviv to Shanghai. In New York alone, WeWork has 49 spaces, most of them nearly full. At the WeWork in Harlem, dance companies share space with hair care start-ups in a common area adorned with murals of jazz musicians. At a WeWork in TriBeCa, fashion designers and alcohol distributors work shoulder to shoulder in a spartan space decorated with neon lighting.

For WeWork to really succeed in changing the way we all work, it is going to have to win over big corporations seeking space for thousands of employees. The strategy is an odd reversal for WeWork, which made its name catering to freelancers and start-ups.
The Weather Channel recently moved its ad sales team into an enormous WeWork in Midtown Manhattan. Barbara Bekkedahl, who runs the group, said the transition was easy and the space comfortable and stylish.
But Ms. Bekkedahl had a complaint, too, one that highlights one of the downsides of communal work space. She suggested that the hygienic and sartorial habits of some of her new office mates were lacking.

“As a TV sales team, we groom and dress for outside sales,” she said. “Some of the techie and start-up types housed at WeWork aren’t facing customers all day, so don’t always have the same standards.”

Gripes about grooming are unlikely to slow down WeWork’s business with corporate clients, especially if Mr. Neumann makes good on his promise to save them money. Because WeWork is building out so much space and buying so much furniture, Mr. Neumann says, he can renovate and operate an office for a fraction of the cost that companies would normally spend.

“We have economies of scale,” he said. “I’ll cut your operational costs between 20 to 50 percent.”

It might seem like another instance of Mr. Neumann’s talking a big game but for the fact that more and more companies — GE, HSBC, Salesforce and Microsoft among them — are signing on.
For years now, big companies have outsourced payroll processing, janitorial services and security. It’s not a stretch to imagine more of them outsourcing the design and maintenance of their offices to a company like WeWork.
“We only have 200,000 members,” Mr. McKelvey, 43, said. “That’s ridiculous. We need to have two million and then 20 million.”

More ‘We’ Than ‘Me’
Bankers and lawyers poured out of skyscrapers and made for the suburbs on a recent Monday night in Manhattan’s financial district. But at 110 Wall Street, a building controlled entirely by WeWork, the party was just getting started.

Last year, this 1960s-era office tower was converted into a mixed-use development of Mr. Neumann’s design. There is a co-working space. On the ground floor are trendy restaurants including Westville, Fuku, Momofuku Milk Bar and a bar called the Mail Room.

And then there is a WeLive: a complex of about 200 fully furnished apartments rented out on a short-term basis. Tenants get the signature WeWork aesthetic of unpolished wood and wrought iron, as well as various perks. There are hot tubs on the terrace. There are arcade games and a pool table in the laundry room. There are a chef’s kitchen and a communal dining room. At a bar on a residential floor, a happy hour was brewing and free Tempranillo was flowing.

In the communal dining area, three brothers — Jordan, Jake and Jimmy DeCicco — were cooking for a half-dozen social media influencers, hoping to stir up enthusiasm for their protein-infused iced coffee company. Over rib-eye steaks and brussels sprouts, they talked about promoting the brand and breaking into new markets, passing out beers to anyone who walked by.

The brothers are all in: They live in WeLive, work in the adjacent WeWork space and exercise at WeWork’s nearby gym, Rise.

“It’s awesome,” Jake DeCicco said. “You just roll out of bed, go down the elevator and get to work.”

Had Mr. Neumann been there to share a beer, those words would have been music to his ears. He believes that creating a work and living environment where people mingle is in fact a world-changing innovation. Each WeWork has a “community manager” who keeps tabs on members, makes introductions and organizes social activities.

If more strangers are colliding by the grapefruit water, the thinking goes, they are more likely to meet up and invest in one another’s socially responsible start-ups, and then the world will be a better place.

“Once you choose to enter a WeWork, you choose to be part of something more ‘we’ than ‘me,’” Mr. Neumann said. “People start coming together. They’ll see each other in the elevator, they talk in the stairways. There’s a thousand other things they do.”
Elevators. Stairways. Hardly world-changing innovations. But WeWork takes extra steps to encourage fraternization. Like beer kegs that never run dry.

More than most companies, WeWork promotes the consumption of alcohol as an inherent virtue. Posters on the wall encourage people to have a drink. There are wine tastings at WeLive. Company parties feature top-shelf liquor. Mr. Neumann has a well-known penchant for tequila, and a well-stocked bar is prominent in his office.

On a recent Tuesday at 4:07 p.m., the community manager of a WeWork in Midtown Manhattan sent an email reading: “It’s time to get your creative juices flowing! Join us on the 5th floor to drink some wine & paint a beautiful picture.” Just after noon on Valentine’s Day, there was an invitation to share wine and cake in the common area.

Though alcohol is a social lubricant for some, it can be off-putting to many others. Many women have shared stories of feeling uncomfortable with what they described as a frat house culture at some WeWorks, prompting some to leave.

As WeWork has grown, minor scandals have rattled the company. In 2015, the company grew ensnared in a complicated legal dispute with a group of former janitors who tried to unionize at a subcontractor that WeWork used. The next year, WeWork drew scrutiny for its use of arbitration to settle workplace disputes, and for its firing of an employee who refused to adhere to a related policy.

But so far nothing — not alcohol, labor disputes, questions about the business fundamentals or bad publicity — has managed to alter the company’s trajectory.
“We’re a disrupter of the way people view the spaces they work in on a day-to-day basis,” said Mr. Dunlevie of Benchmark. “And we’re in the early days of taking advantage of that phenomenon.”

Teaching Tykes
In September, WeWork will open its most ambitious project to date: a kindergarten. It may also be the effort that tests whether WeWork is flying too close to the sun.
The creation of Mr. Neumann’s wife, Rebekah, 39, the school is known as WeGrow. When it opens, it promises a well-designed space with a curriculum that emphasizes socializing and entrepreneurship for 3-year-olds on up.

WeGrow fits neatly into Mr. Neumann’s expansive vision for creating a generation of empathetic social impact entrepreneurs. But the risk-reward calculus is different when starting a school.

WeGrow won’t scale as rapidly as WeWork has, so the financial upside is limited. Yet should something go wrong, the fallout could be devastating: It’s one thing to be responsible for the internet going out or paper running low at the communal printer. It’s another thing to take responsibility for the health and development of someone’s child.

Though Ms. Neumann has no background in education (on the website, she describes herself as “an avid student of life” and says her “superpower” is “intuition”), she has applied for accreditation from the state, has hired a team of career educators and is accepting applications for the coming school year. Tuition for toddlers: $36,000 a year.

“We all understand how complicated and regulated school is compared to the simpler business that we are already in,” Mr. Neumann said. “But we decided we’re going to go into education. If you really want to change the world, change kids when they’re 2.”
As he proselytized, Mr. Neumann was sitting on an enormous leather couch in his Chelsea office, which is bigger than many New York City apartments. It included a conference table, a video conferencing setup, several desks, a bar, spreads of food, a Peloton exercise bike, a climbing machine, a boxing bag hanging from the ceiling, a gong, an antechamber where assistants work and a private bathroom.

“It’s going to work,” Mr. Neumann continued. “Is it going to be perfect? Definitely not. Are we going to make mistakes? A hundred percent. Are we going to be comfortable admitting those mistakes? Definitely. It’s what we do here.”

Though such unbridled zeal can be abrasive to some, it could also be viewed as the mark of a peripatetic savant. Walter Isaacson, the biographer of Steve Jobs, Albert Einstein, Benjamin Franklin and Leonardo da Vinci, counts Mr. Neumann as a friend, and said he shared some of the attributes that had allowed those other titans to succeed.

“He has an instinctive feel for how millennials are going to want to have community work experiences without joining large corporations,” Mr. Isaacson said. “And like Steve Jobs and other great entrepreneurs, he knows how to connect the humanities with business and technology.”

‘Make a Life’
It can be tempting to dismiss WeWork as just another overvalued start-up that is high on its own rhetoric and flush with easy money from naïve investors. With little more than faddish interior design, free beer and an invitation to socialize with strangers, Mr. Neumann claims to have conjured up a whole new paradigm for white-collar workers — and for education — and vows that it can change the world.

It’s the kind of utopian prattle that can come off as dangerously out of touch at a moment when a backlash against big tech is brewing. But if any of these potential pitfalls concern Mr. Neumann, he doesn’t show it.
On a Wednesday night in January, Mr. Neumann strode onstage before a packed house at the Theater at Madison Square Garden, basked in spotlights. Wearing a black leather biker jacket and a T-shirt that read “High on We,” Mr. Neumann was playing host at his own extravagant party, a multiday celebration of WeWork and its extended community.

On this, the first night of festivities, Mr. Neumann would oversee a “Shark Tank”-like competition for socially responsible small businesses — ranging from a start-up that made customized prosthetics to a food-delivery service staffed by refugees — each vying for a $1 million prize.

Earlier, Mr. Neumann had rattled off the company’s achievements and outlined some of its more outsize ambitions. As the evening’s performer, the Grammy-winning rapper Macklemore, waited backstage, Mr. Neumann went on an impromptu riff about how people should “make a life, not just a living,” the company’s aspirational motto.

Mr. Neumann also stated that it was important to support social entrepreneurs. “Of course that makes a lot of sense, but who’s going to pay for that?” he said. “And we said, ‘Well, Masa might!’”

The line generated a laugh among the hundreds of knowing employees in the room — Mr. Son, whose nickname is Masa, was conveniently absent — but it was a tell from Mr. Neumann, a sly admission that at this point he is playing with house money.

Then, when the time came to choose a winner, Mr. Neumann made a surprise announcement: Instead of choosing one recipient, WeWork would give away $1 million each to two of the companies — Re:3D, a 3-D printing company, and Global Vision 2020, a nonprofit that provides prescription glasses to people in the developing world. And it would give another couple of million to the other half-dozen finalists.

Confetti fell from the rafters. The winners cried on stage. Mr. Neumann took it all in, beaming.

Even Macklemore was taken aback by all the money flying around. “I was just watching it, chugging a Red Bull,” he said shortly into his set, “and I immediately thought, ‘Damn, I should have got into technology.’”
Continue reading the main story

Cole Wilson for The New York Times
David Gelles is the Corner Office columnist and a business reporter. Follow him on Twitter @dgelles and LinkedIn.

A version of this article appears in print on February 18, 2018, on Page BU1 of the New York edition with the headline: First, Office Space; Then the World.

=================== PRIOR POST from January, 2015 ============
Co-Working

The field is going to explode.

The model for co-working is ROAM. GREAT business model – huge uptake. Place was packed.

They currently are in Alpharetta and Dunwoody, and are opening a Buckhead facility in Tower Place this summer. They have a mini-cafeteria, office space, mail handling, membership services, printing, etc.

Here is the download:

http://meetatroam.com

“Roam is the innovator’s workplace; a meeting and gathering experience for the new workforce. We are partnering for success by creating environments where people focus, collaborate, learn and socialize.”

“We are a Collective, a Local Community of Innovators, Pioneers and Visionaries.”

From a member: “Patrick also thinks that energy is Roam’s differentiator. “When you walk into Roam Dunwoody, it’s like you walk into a room full of vibrations,” he says. He loves interacting with the other members here and feeding off of that energy. “Every Roam member is passionate about whatever they do. They really want their business to make an impact.” The members as a whole are a forward-thinking group, open to new ideas and supportive of innovation, “

This entry was posted in Architecture, Well-Being – PersonaL and tagged Architecture, personal well-being, Serenbe on January 14, 2015.

Brother Jim

Here’s a short biography of my older brother James Robert Reid, born December 10, 1948:

Fall of 1967*, commuter freshman at Northeastern (with Bobby Tallent, Tommy Carabine, Peter Flynn) , Business Administration major. Bad student.
Joined rowing team. At 6’2″ I was the smallest guy in the boat.

Fall of 1968, made the Varsity, our eight won The Head of the Charles Regatta.*
Worked an interesting variety of NU Co-Op jobs, Boston Globe*, Haskins and Sells*.
1969, changed major to English, better student.

1970, my fiancee, Jeanne Nelson’ s father, a towboat captain for Perini Corp. finagled me a deckhand job (perhaps my best job ever) on Dredge #111 which was dredging the inlet/cooling water channel for the Plymouth Nuclear Power Plant.*
1970, married Jeanne Nelson (too young, imo). First apt at 287 Beacon Street. I could bike to NU, both school and the crew boathouse (stored my treasured Mercier 10 speed in the bathtub). Jeanne could walk to work for the Sonnabends at the Sonesta.
Fall, 1970, Still in the Varsity boat, Olympians Dietz and Coffey powered us to another win in the Head of the Charles Regatta.

June 1972, graduated from NU at Boston Garden, enduring the hot, hanging stink of the previous week’s circus animals.

August, 1972, reported to US Naval Reserve, AOCS and flight training, in Pensacola Florida, 95° and 95% humidity. Met my first surly Marine D.I., Sgt. E. Beadle.*
Dec 1972, graduated from AOCS, commissioned as an Ensign, USNR. Reported for Primary flight training at NAS Saufley, flying T-34, single engine, low wing trainer. Instructor Lt. Ron Pritz, USMC (helicopter pilot).

May 29, 1973, daughter Amy born on base hospital, costing $5.25 (Jeanne’s meals).
Left flying and applied for honorable discharge. While waiting for BUPERS paperwork, I was stationed as a P.A. (Public Affairs) Officer with The Blue Angels, traveled the country to airshows, ironically promoting Navy flying, even though I had left it.*
Summer, 1973, Navy moved us back to Winthrop during the Arab oil embargo, recession, no jobs, scary with young family. From that point, personal and economic frustration ate at our marriage, probably doomed it, we divorced in 1975. Lived out of boxes with my parents for awhile. Moved to Boston, walking distance from where I was working (at NU). Started MBA studies, A student.

I’ll tell you the “rest of the story” when I see you. All good now, just celebrated 36 years of second marriage, writing (two children’s books for sale on Amazon). Along the way, I worked in Admin for 3 tech companies, learned hardscaping and landscaping, frame and finish carpentry, cabinet making, land surveying, stone masonry, woodstove installation, served 6 years on regional school committee, had a stint in direct sales, drove executive cars for BostonCoach, now still work on my 1953 Ford Jubilee farm tractor, still felling trees, burning wood, just held 24th Extreme Camping with old, and good friends (long story).

* I have written extensively about these experiences. Stay tuned for self-publication of my collection of “memoir essays”, working title, Missing Man.

Amazon, BH, JPMorgan

With 1.2 million employees, Amazon, Berkshire Hathaway, and JP Morgan have decided to venture together into health care for their employees.

Following in the grand tradition of Henry Ford, who set up Henry Ford Hospital in Detroit, these three giants are stepping in too.

They have no illusions about how difficult it will be. But with premiums rising 19% per year, its clear that Congress is doing nothing, and someone has to do something.

“Planning for the new company is being led by Marvelle Sullivan Berchtold, a JPMorgan managing director who was previously head of the Swiss drugmaker Novartis’s mergers and acquisitions strategy; Mr. Combs; and Beth Galetti, a senior vice president at Amazon.”

The article points out that there are others working on this.

“Robert Andrews, chief executive of the Healthcare Transformation Alliance, a group of 46 companies, including Coca-Cola and American Express, that have banded together to lower health care costs.”

“Walmart contracted with groups like the Cleveland Clinic, Mayo and Geisinger, among others, to take care of employees who need organ transplants and heart and spine care.”

“Caterpillar, the construction equipment manufacturer, sets its own rules for drug coverage, which it has said saves it millions of dollars per year, even though it still uses a pharmacy benefit manager to process its claims.”

Suzanne Delbanco, the executive director for the Catalyst for Payment Reform, a nonprofit group that mainly represents employers”

=================
CREDIT: https://www.nytimes.com/2018/01/30/technology/amazon-berkshire-hathaway-jpmorgan-health-care.html?smid=nytcore-ipad-share&smprod=nytcore-ipad

TECHNOLOGY
Amazon, Berkshire Hathaway and JPMorgan Team Up to Try to Disrupt Health Care

By NICK WINGFIELD, KATIE THOMAS and REED ABELSON
JAN. 30, 2018
SEATTLE — Three corporate behemoths — Amazon, Berkshire Hathaway and JPMorgan Chase — announced on Tuesday that they would form an independent health care company for their employees in the United States.

The alliance was a sign of just how frustrated American businesses are with the state of the nation’s health care system and the rapidly spiraling cost of medical treatment. It also caused further turmoil in an industry reeling from attempts by new players to attack a notoriously inefficient, intractable web of doctors, hospitals, insurers and pharmaceutical companies.
It was unclear how extensively the three partners would overhaul their employees’ existing health coverage — whether they would simply help workers find a local doctor, steer employees to online medical advice or use their muscle to negotiate lower prices for drugs and procedures. While the alliance will apply only to their employees, these corporations are so closely watched that whatever successes they have could become models for other businesses.

Major employers, from Walmart to Caterpillar, have tried for years to tackle the high costs and complexity of health care, and have grown increasingly frustrated as Congress has deadlocked over the issue, leaving many of the thorniest issues to private industry. About 151 million Americans get their health insurance from an employer.
(Why will health care be so difficult for these companies to untangle? Analysis from The Upshot.)
But Tuesday’s announcement landed like a thunderclap — sending stocks for insurers and other major health companies tumbling. Shares of health care companies like UnitedHealth Group and Anthem plunged on Tuesday, dragging down the broader stock market.

That weakness reflects the strength of the new entrants. The partnership brings together Amazon, the online retail giant known for disrupting major industries; Berkshire Hathaway, the holding company led by the billionaire investor Warren E. Buffett; and JPMorgan Chase, the largest bank in the United States by assets.

They are moving into an industry where the lines between traditionally distinct areas, such as pharmacies, insurers and providers, are increasingly blurry. CVS Health’s deal last month to buy the health insurer Aetna for about $69 billion is just one example of the changes underway. Separately, Amazon’s potential entry into the pharmacy business continues to rattle major drug companies and distributors.
(Here’s a look at how the even the threat of Amazon’s entry into an industry can rattle stocks.)

The companies said the initiative, which is in its early stages, would be “free from profit-making incentives and constraints,” but did not specify whether that meant they would create a nonprofit organization. The tax implications were also unclear because so few details were released.
Jamie Dimon, the chief executive of JPMorgan Chase, said in a statement that the effort could eventually be expanded to benefit all Americans.

“The health care system is complex, and we enter into this challenge open-eyed about the degree of difficulty,” Jeff Bezos, Amazon’s founder and chief executive, said in a statement. “Hard as it might be, reducing health care’s burden on the economy while improving outcomes for employees and their families would be worth the effort.”

The announcement touched off a wave of speculation about what the new company might do, especially given Amazon’s extensive reach into the daily lives of Americans — from where they buy their paper towels to what they watch on television. It follows speculation that the company, which recently purchased the grocery chain Whole Foods, might use its stores as locations for pharmacies or clinics.
(We asked health care experts to imagine what the three corporations might do.)

“It could be big,” Ed Kaplan, who negotiates health coverage on behalf of large employers as the national health practice leader for the Segal Group, said of the announcement. “Those are three big players, and I think if they get into health care insurance or the health care coverage space, they are going to make a big impact.”

TAKING ON ‘THE HUNGRY TAPEWORM’
A look at the three companies that announced a joint health care initiative on Tuesday.

Total employees: 1.2 million 
Amazon: 540,000 
Berkshire Hathaway: 367,000
JPMorgan Chase: 252,000.
Individual strengths 
Amazon: logistics and technology
Berkshire Hathaway: insurance
JPMorgan Chase: finance.

Jeff Bezos of Amazon:
“The healthcare system is complex, and we enter into this challenge open-eyed about the degree of difficulty.”
Warren E. Buffett of Berkshire Hathaway:
“The ballooning costs of healthcare act as a hungry tapeworm on the American economy. Our group does not come to this problem with answers. But we also do not accept it as inevitable.”
Jamie Dimon of JPMorgan Chase:
“The three of our companies have extraordinary resources, and our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans.”

But others were less sure, noting that the three companies — which, combined, employ more than one million people — might still hold little sway over the largest insurers and pharmacy benefit managers, who oversee the benefits of tens of millions of Americans.

“This is not news in terms of jumbo employers being frustrated with what they can get through the traditional system,” said Sam Glick of the management consulting firm Oliver Wyman in San Francisco. He played down the notion that the three partners would have more success getting lower prices from hospitals and doctors. “The idea that they could have any sort of negotiation leverage with unit cost is a pretty far stretch.”

Even the three companies don’t seem to be sure of how to shake up health care. People briefed on the plan, who asked for anonymity because the discussions were private, said the executives decided to announce the initiative while still a concept in part so they can begin hiring staff for the new company.

Three people familiar with the partnership said it took shape as Mr. Bezos, Mr. Buffett, and Mr. Dimon, who are friends, discussed the challenges of providing insurance to their employees. They decided their combined access to data about how consumers make choices, along with an understanding of the intricacies of health insurance, would inevitably lead to some kind of new efficiency — whatever it might turn out to be.

“The ballooning costs of health care act as a hungry tapeworm on the American economy,” Mr. Buffett said in the statement. “Our group does not come to this problem with answers. But we also do not accept it as inevitable.”

Over the past several months, the three had met formally — along with Todd Combs, an investment officer at Berkshire Hathaway who is also on JPMorgan’s board — to discuss the idea, according to a person familiar with Mr. Buffett’s thinking.

The three chief executives saw one another at the Alfalfa Club dinner in Washington on Saturday, but by then each had already had dozens of conversations with the small in-house teams they had assembled. The plan was set.

Mr. Buffett’s motivation stems in part from conversations he has had with two people close to him who have been diagnosed with multiple sclerosis, according to the person. Mr. Buffett, the person said, believes the condition of the country’s health care system is a root cause of economic inequality, with wealthier people enjoying better, longer lives because they can afford good coverage As Mr. Buffett himself has aged — he is 87 — the contrast between his moneyed friends and others has grown starker, the person said.

The companies said they would initially focus on using technology to simplify care, but did not elaborate on how they intended to do that or bring down costs. One of the people briefed on the alliance said the new company wouldn’t replace existing health insurers or hospitals.

Planning for the new company is being led by Marvelle Sullivan Berchtold, a JPMorgan managing director who was previously head of the Swiss drugmaker Novartis’s mergers and acquisitions strategy; Mr. Combs; and Beth Galetti, a senior vice president at Amazon.

One potential avenue for the partnership might be an online health care dashboard that connects employees with the closest and best doctor specializing in whatever ailment they select from a drop-down menu. Perhaps the companies would strike deals to offer employee discounts with service providers like medical testing facilities.

“Each of those companies has extensive experience using transformative technology in their own businesses,” said John Sculley, the former chief executive of Apple who is now chairman of a health care start-up, RxAdvance. “I think it’s a great counterweight to what government leadership hasn’t done, which is to focus on how do we make this health care system sustainable.”

How Amazon Rattles Other Companies
The e-commerce giant’s actions – some big, like buying Whole Foods Markets; some smaller, like Amazon meal kits – have led to stock sell-offs for a wide range of businesses.

Erik Gordon, a professor at the University of Michigan’s Ross School of Business, predicted that the companies would attempt to modernize the cumbersome process of doctor appointments by making it more like booking a restaurant reservation on OpenTable, while eliminating the need to regularly fill out paper forms on clipboards.

“I think they will bring the customer-facing, patient-facing thing into your smartphone,” he said.

Amazon has long been mentioned by health care analysts and industry executives as a potential new player in the sector. While the company has remained quiet about its plans, some analysts noted that companies often use their own employees as a testing ground for future initiatives.

The entry of Amazon and its partners adds to the upheaval in an industry where much is changing, from government programs after the overhaul of the tax law to the uncertain future of the Affordable Care Act. All the while, medical costs have persistently been on the rise.

Nationwide, average premiums for family coverage for employees rose to $18,764 last year, an increase of 19 percent since 2012, according to the Kaiser Family Foundation. Workers are increasingly paying a greater share of those costs — they now pay 30 percent of the premium, in addition to high deductibles and growing co-payments.
“Our members’ balance sheets speak for themselves — health care is a growing cost at a time when other costs are either not rising or falling,” said Robert Andrews, chief executive of the Healthcare Transformation Alliance, a group of 46 companies, including Coca-Cola and American Express, that have banded together to lower health care costs.

Other major employers have also sought more direct control over their employees’ health care. Walmart contracted with groups like the Cleveland Clinic, Mayo and Geisinger, among others, to take care of employees who need organ transplants and heart and spine care. Caterpillar, the construction equipment manufacturer, sets its own rules for drug coverage, which it has said saves it millions of dollars per year, even though it still uses a pharmacy benefit manager to process its claims.

Suzanne Delbanco, the executive director for the Catalyst for Payment Reform, a nonprofit group that mainly represents employers, said controlling rising prices is especially hard in markets where a local hospital or medical group dominates. While some have tried to tackle the issue in different ways, like sending employees with heart conditions to a specific group, “it’s piecemeal,” she said.

She added, “There are so many opportunities to do this better.”

The issue is not solely a 21st-century concern: In 1915, Henry Ford became increasingly worried about the quality of health care available to his growing work force in Detroit, so he opened the Henry Ford Hospital. It is still in existence today.

Nick Wingfield reported from Seattle, Katie Thomas from Chicago and Reed Abelson from San Francisco. Michael J. de la Merced contributed reporting from London, and Emily Flitter from New York.

A version of this article appears in print on January 31, 2018, on Page A1 of the New York edition with the headline: 3 Giants Form Health Alliance, Rocking Insurers. Order Reprints| Today’s Paper|Subscribe