Why does the government let a company like Herbalife stay in business?(latimes.com)
latimes.com
Why does the government let a company like Herbalife stay in business?
https://www.latimes.com/business/story/2020-08-28/herbalife-lawbreaking-companies
86 comments
If you read the news about people falling victims to frauds and scams, you will notice most of those interviewed are young adults and old people. This is not a coincidence. You can educate people all you want, but those too young to have absorbed it or too old to be able to retain it (due to mental decline) will remain vulnerable.
Mental decline happens to everyone. Not necessarily to a severe level that would make one incapable of living independently, but enough to make them less sharp. You may be young enough to spot a scam from miles away, but your senses will most likely dull over time. In a couple of decades, you may be just as likely to be featured in a news piece about victims of a scam as the ones you are calling uneducated and greedy now.
Mental decline happens to everyone. Not necessarily to a severe level that would make one incapable of living independently, but enough to make them less sharp. You may be young enough to spot a scam from miles away, but your senses will most likely dull over time. In a couple of decades, you may be just as likely to be featured in a news piece about victims of a scam as the ones you are calling uneducated and greedy now.
Capitalism is strange that way, it's weird how our default state in business is to not being able to trust each other, because we assume the other party is probably trying to screw us over. I was wondering if it's always been like that since Roman times, since there's even a Latin term for "Buyer beware": https://en.wikipedia.org/wiki/Caveat_emptor .
Maybe you have all smart relatives.
But there is a certain cruelty in doing business by deceiving people, and where the remedy is ex post facto “raising your education level” to become less deceivable.
But there is a certain cruelty in doing business by deceiving people, and where the remedy is ex post facto “raising your education level” to become less deceivable.
If a business couldn’t exist in a world full of smart people, that’s a pretty good clue that you should just go after it now. You’ll be waiting forever on the former.
> Why does it stay in business? Because there is nothing wrong with a company that exploits the greed of individuals.
There's certainly plenty wrong with it; perhaps you meant to say it's not illegal.
There's certainly plenty wrong with it; perhaps you meant to say it's not illegal.
I mean, morality is an opinion, so it doesn't really make sense to try and correct someone about it.
This is an incredibly glib dismissal of an entire area of philosophy.
It may seem intuitively obvious to you that there are not moral facts (it seemed intuitively obvious that the opposite was true to people even as recently as 150 years ago) but the debate is hardly settled by any intervening scientific or cultural or philosophical advancement.
I guess read J.L. Mackie's "Ethics" for an introduction to the subject.
It may seem intuitively obvious to you that there are not moral facts (it seemed intuitively obvious that the opposite was true to people even as recently as 150 years ago) but the debate is hardly settled by any intervening scientific or cultural or philosophical advancement.
I guess read J.L. Mackie's "Ethics" for an introduction to the subject.
Is the internet not a perfectly reasonable place to state a reasonable and mainstream opinion? And if not, why don't you tell this to the GP as well? I responded to a statement of opinion with a counter-opinion.
Morality is subjective, maybe its wrong to you but may not wrong for me.
A recent conversation on reddit exposed me to somebody who feels its ok to say card fees are for chumps and fund his no fee high return points wins. I think predating on ill informed poorer people who incur credit card debt and fees is wrong personally. Some people think it's OK.
Herbalife is in this spectrum of product: the government is mostly financially a-moral not moral or imorral and so prostitution income is not untaxable even if prostitution is. Herbalife has to get closer to the ponzi end of the spectrum to fall afoul of the law. Right now, it's only appealing to greed.
If herbalife and flyer miles points cards predate willful stupidity then the government needs a strong drive to legislate because in the end it too is conflicted.
Its a long bow libertarian position I dont agree with BTW, I think the role of government is to protect the innocent dupes. But there are thin-end-of-the-wedge arguments a-plenty here.
If I were king, I'd ban herbalife. If I needed a kings tax income I might not.
Herbalife is in this spectrum of product: the government is mostly financially a-moral not moral or imorral and so prostitution income is not untaxable even if prostitution is. Herbalife has to get closer to the ponzi end of the spectrum to fall afoul of the law. Right now, it's only appealing to greed.
If herbalife and flyer miles points cards predate willful stupidity then the government needs a strong drive to legislate because in the end it too is conflicted.
Its a long bow libertarian position I dont agree with BTW, I think the role of government is to protect the innocent dupes. But there are thin-end-of-the-wedge arguments a-plenty here.
If I were king, I'd ban herbalife. If I needed a kings tax income I might not.
>who feels its ok to say card fees are for chumps and fund his no fee high return points wins. I think predating on ill informed poorer people who incur credit card debt and fees is wrong personally.
Are you talking about interest for carrying a balance, or the various fees you get hit with if you screw up (eg. late fees, returned payment fees)?
Are you talking about interest for carrying a balance, or the various fees you get hit with if you screw up (eg. late fees, returned payment fees)?
I wasn't that specific. I am pretty sure the general principle here is that any fee you can avoid by rigorous use of the card sensibly, within your limit, he feels its acceptable to "share" as a benefit the fee free element, where the profit for the card company is in the late paying, over extended customer.
Carrying a balance and paying card interest rate when secured and unsecured loan rates are several if not ten or more percentage points lower (card interest was 20-23% in 2019 when bank loans were under 10% in my economy) provides the profits which allow richer card holders to avoid costs. This still feels like predatory behaviour to me.
His "i got the points be like me" is herbalife marketing of the gilt edged lifestyle which attracts the chumps who pay the cost of his fee free rewards. Its not implicit, it is explicitly why they offer him and his income bracket the deal.
Carrying a balance and paying card interest rate when secured and unsecured loan rates are several if not ten or more percentage points lower (card interest was 20-23% in 2019 when bank loans were under 10% in my economy) provides the profits which allow richer card holders to avoid costs. This still feels like predatory behaviour to me.
His "i got the points be like me" is herbalife marketing of the gilt edged lifestyle which attracts the chumps who pay the cost of his fee free rewards. Its not implicit, it is explicitly why they offer him and his income bracket the deal.
This depends on the card. For subprime cards, it's true that late fees and interest charges make up most of credit card companies' revenue. But in the premium market segment that he's talking about, ~90% of revenue comes from annual fees and merchant fees. Even customers that never pay a dime of interest or a single nuisance fee are profitable.
As one case in point, most of American Express' flagship products don't even allow you to carry a balance (and thus pay interest).
Source: work in the industry
As one case in point, most of American Express' flagship products don't even allow you to carry a balance (and thus pay interest).
Source: work in the industry
What's the cut off for premium above? I was on the Amex lower tiers for work related stuff and the no max thing was seriously useful for international travel. Also frightening.
It's a bit nebulous, but as a rule high-annual-fee/interest rate rewards cards are built around this model; the higher the annual fee, the less interest income a bank expects to earn.
Issuers tend to specialize, too. For instance, banks like Barclays, Chase and Amex only (intentionally) target prime customers. Chase has been known to fire customers that suddenly start carrying significant balances on their cards, for instance.
On the other hand, banks like Capital One and Credit One explicitly target subprime customers and make the vast majority of their income from interest. Whereas Amex makes 90% of their card income from annual fees/interchange, for C1 it's more like 90% interest/10% interchange. Chase is like 65/35 Interchange/interest, for comparison.
For Amex, the simplest rule is that any card named after a color (Amex Gold, Amex Green, Amex Platinum etc) doesn't charge interest.
Oh - and the Amex charge cards don't actually have no limit. They do have a line, it's just hidden (and somewhat larger than most credit limits). Amex actually has a 'check my spending power' tool on their website where you can plug in a hypothetical purchase and it'll tell you if they would (hypothetically) approve it.
Issuers tend to specialize, too. For instance, banks like Barclays, Chase and Amex only (intentionally) target prime customers. Chase has been known to fire customers that suddenly start carrying significant balances on their cards, for instance.
On the other hand, banks like Capital One and Credit One explicitly target subprime customers and make the vast majority of their income from interest. Whereas Amex makes 90% of their card income from annual fees/interchange, for C1 it's more like 90% interest/10% interchange. Chase is like 65/35 Interchange/interest, for comparison.
For Amex, the simplest rule is that any card named after a color (Amex Gold, Amex Green, Amex Platinum etc) doesn't charge interest.
Oh - and the Amex charge cards don't actually have no limit. They do have a line, it's just hidden (and somewhat larger than most credit limits). Amex actually has a 'check my spending power' tool on their website where you can plug in a hypothetical purchase and it'll tell you if they would (hypothetically) approve it.
The Amex cards with no limit are charge cards, not credit cards. They always specify what your minimum income is and run credit checks on you before you're allowed to get one.
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So why isn't that acceptable? Should he start accruing balances and paying only the minimums just to support the credit card companies? Seems like he is just being practical. I've never paid a dime of interest in over 25 years. None of my cards have membership fees. Every couple years, I switch over to which over one gives me the best deal on points.
Not withstanding having been corrected above, I believe his points accrual is funded by chumps. I also pay no fees in my card, and have no points. I dont think my card is spotless either: the product can only work because there is revenue in the system. If its merchant fees we're all paying a non tax impost on purchases which is out of relation to the cost of electronic cash services, and if its the 23% apr its usery.
Some of the revenue comes from selling purchasing data about higher net-worth cardholders which is why your MasterCard Black or Visa Infinite tend to come with higher rewards.
Can you say reg-u-la-tory cap—ture
Our own government perpetuates the greatest of all frauds, the lottery, over the poor and uneducated to the tune of tens of billions a year. I’ve tried all my life to get my mother to stop buying tickets and she simply won’t despite being a complete dependent of her children (and she’s never won decades later!). It’s a sickness.
Herbalife (and Casinos) for that matter feed off that sickness as well. It’s hard to rationalize banning one and not ban the others and from my ignorant perspective, American society is not in a place where it can collectively come to a consensus to end industries that feed off of the intellectual, emotional and psychological deficiencies of people. The machine is just too big.
Herbalife (and Casinos) for that matter feed off that sickness as well. It’s hard to rationalize banning one and not ban the others and from my ignorant perspective, American society is not in a place where it can collectively come to a consensus to end industries that feed off of the intellectual, emotional and psychological deficiencies of people. The machine is just too big.
It's pretty common for not poor people to buy lottery tickets. When the NY lottery was really big about 3 years ago, everyone at my old firm put in a $100 (so like 7k total) to buy tickets. Ended up winning $200, so we bought some champagne.
I noticed other firms doing the same thing, with the convenience store guy telling me that the building in total spent over 100k on lottery tickets within a week or so.
Moreover, the lottery isn't a fraud. The mechanisms and payouts are all known, much like roulette or blackjack. We have a word for it, and it's called gambling (not fraud).
I noticed other firms doing the same thing, with the convenience store guy telling me that the building in total spent over 100k on lottery tickets within a week or so.
Moreover, the lottery isn't a fraud. The mechanisms and payouts are all known, much like roulette or blackjack. We have a word for it, and it's called gambling (not fraud).
I feel the fraud part is when states claim having a lottery will provide more money for schools and then in the following years they cut general education spending.
I even remember hearing ads on radio encouraging folks to "pay-it-forward" by buying more lottery tickets and framing gambling as charitable giving.
"For the children" indeed.
I even remember hearing ads on radio encouraging folks to "pay-it-forward" by buying more lottery tickets and framing gambling as charitable giving.
"For the children" indeed.
At least in the US, gross lottery revenue is only a fraction, about 1/8th the total expenditure on K-12 education.
I think John Oliver put it best:
https://www.youtube.com/watch?v=9PK-netuhHA
https://www.youtube.com/watch?v=9PK-netuhHA
I've worked at a couple of places that better than average paid folks pooled some money to buy Powerball tickets. Its low grade gambling and a little bit of team building. I do remember the big one in the late 90's we won our money back which actually was much more difficult than just losing.
I was asked to buy $120 worth of tickets in 94ish and not one damn winning number showed up on any of the tickets. It was requested I never buy for the group again.
I was asked to buy $120 worth of tickets in 94ish and not one damn winning number showed up on any of the tickets. It was requested I never buy for the group again.
> It was requested I never buy for the group again.
Hah! Obviously they should have sent you to buy the tickets, scoured them all for missing numbers, and then sent someone else to buy those.
I would guess that buying $120 of tickets and not matching even a single number is extremely improbable! You were the golden goose, just inverted.
Hah! Obviously they should have sent you to buy the tickets, scoured them all for missing numbers, and then sent someone else to buy those.
I would guess that buying $120 of tickets and not matching even a single number is extremely improbable! You were the golden goose, just inverted.
If I remember right, the odds were better to win the lottery than do what I did. I did pull out a probability book at the time. Born under a bad moon I guess.
I think the people buying scratch offs every week are gambling. The people who buy a Powerball or Mega Millions a few times a year, when it gets huge, are just doing it just for entertainment’s sake and have no serious expectation of winning.
It’s still problematic, but the real argument for keeping the lottery is that without it, organized crime would start running more of their own numbers games again.
It’s still problematic, but the real argument for keeping the lottery is that without it, organized crime would start running more of their own numbers games again.
Agreed. It definitely makes sense from a harm reduction standpoint, keeping people from turning to more predatory options.
At the same time, it's pretty sickening to see the normalization of dangling a pipedream in front of people trapped in lives of 'quiet desperation.'
It's a 60% best solution, where the next best solution is 20% best.
At the same time, it's pretty sickening to see the normalization of dangling a pipedream in front of people trapped in lives of 'quiet desperation.'
It's a 60% best solution, where the next best solution is 20% best.
The lottery is not gambling because the probability of winning the lottery is 1/290 million making the expected payout almost zero in most circumstances; which is significantly less than black jack and orders of magnitude harder to win.
Under what other circumstances would be possibility tolerate that low level of efficacy?
Under what other circumstances would be possibility tolerate that low level of efficacy?
Until it is a fraud: https://en.m.wikipedia.org/wiki/Hot_Lotto_fraud_scandal
While I don't really care about the lottery and I'm fully aware about the odds, whenever there's a buy event in the office I always join. I consider that an insurance against my coworker winning.
You might have just described an election.
What percentage of your combined salaries was 7k?
How many people were playing the lottery weekly?
How many people were playing the lottery with the mentality it was the only way to achieve financial freedom?
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Do you really not see the difference between poor people gambling daily and well-off people joining in on it as a spectacle?
In case you need it spelled out... it's no surprise the poorest populations consistently end up putting the most into the lottery because of weaker educations, lower financial literacy, bleaker financial outlooks
https://cnsmaryland.org/gambling/lottery/lottery.html
https://madison.com/wsj/news/local/govt-and-politics/wiscons...
https://southsideweekly.com/illinois-lottery-exacerbates-ine...
The story is the same all over the country. It's easy to sit back from a comfortable place on here and say "well the odds are right there, can't they see how low they are??" but it certainly doesn't show strong social awarenesses...
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The worst part is the most vulnerable people aren't getting out nearly what they put in between a lack of social safety nets and the fact these groups tend to be the most underrepresented in their governments.
https://www.bloomberg.com/news/articles/2017-02-21/where-cas...
> “In almost every case states either earmark the funds for education but then decrease the general fund appropriations for education by a similar amount, or, in more cases, they simply put the money in the general fund,” says Denise Runge, a dean at the University of Alaska Anchorage and editor of Resorting to Casinos: The Mississippi Gambling Industry.
In fact in some cases, these lottery are literally taking from the poor and giving to the middle and upper classes.
There's the merit-based scholarship example in the article, but even cases where funds end up being used on things like "historical preservation"... historical preservation is great, but feeding the hungry and giving the homeless places to sleep feel like much better investments in our populations. There are tons of "feel good" initiatives in a similar vein
How many people were playing the lottery weekly?
How many people were playing the lottery with the mentality it was the only way to achieve financial freedom?
-
Do you really not see the difference between poor people gambling daily and well-off people joining in on it as a spectacle?
In case you need it spelled out... it's no surprise the poorest populations consistently end up putting the most into the lottery because of weaker educations, lower financial literacy, bleaker financial outlooks
https://cnsmaryland.org/gambling/lottery/lottery.html
https://madison.com/wsj/news/local/govt-and-politics/wiscons...
https://southsideweekly.com/illinois-lottery-exacerbates-ine...
The story is the same all over the country. It's easy to sit back from a comfortable place on here and say "well the odds are right there, can't they see how low they are??" but it certainly doesn't show strong social awarenesses...
-
The worst part is the most vulnerable people aren't getting out nearly what they put in between a lack of social safety nets and the fact these groups tend to be the most underrepresented in their governments.
https://www.bloomberg.com/news/articles/2017-02-21/where-cas...
> “In almost every case states either earmark the funds for education but then decrease the general fund appropriations for education by a similar amount, or, in more cases, they simply put the money in the general fund,” says Denise Runge, a dean at the University of Alaska Anchorage and editor of Resorting to Casinos: The Mississippi Gambling Industry.
In fact in some cases, these lottery are literally taking from the poor and giving to the middle and upper classes.
There's the merit-based scholarship example in the article, but even cases where funds end up being used on things like "historical preservation"... historical preservation is great, but feeding the hungry and giving the homeless places to sleep feel like much better investments in our populations. There are tons of "feel good" initiatives in a similar vein
I think what you're saying is that lottery tickets function as a regressive tax, along with cigarette and alcohol taxes. The poorest and disproportionately taxed with these kinds of products.
It's a good point, and many economists are against regressive taxation.
But people want to gamble and you're not going to change their behavior by eliminating the lottery. Before state run lotteries, numbers games were very popular and run by organized crime.
The government has much less power to change people's behavior that many assume. After all, the drug war has been a historic failure, just like prohibition before it.
You might as well make these kinds of activities legal in order to reduce violence and disempower organized crime.
People are gonna do what they want to do and ultimately, they are responsible for those (possibly poor) decisions. You can't protect people from themselves, only try and give them the tools to make decisions that maximize happiness over their life-time.
It's a good point, and many economists are against regressive taxation.
But people want to gamble and you're not going to change their behavior by eliminating the lottery. Before state run lotteries, numbers games were very popular and run by organized crime.
The government has much less power to change people's behavior that many assume. After all, the drug war has been a historic failure, just like prohibition before it.
You might as well make these kinds of activities legal in order to reduce violence and disempower organized crime.
People are gonna do what they want to do and ultimately, they are responsible for those (possibly poor) decisions. You can't protect people from themselves, only try and give them the tools to make decisions that maximize happiness over their life-time.
No one is saying gambling should be illegal or the government should somehow force people to stop gambling...
But there is so much that could be done to try and limit the damage it's doing to poorer populations, and increase the good it's doing for those populations at the same time.
Bans and restrictions on advertising lotteries, limiting points of sale per sq. mi., actually using the funds as claimed when instated, focusing on the types of gambling and their effect on addiction rates (https://www.psychologytoday.com/us/blog/in-excess/202003/pro...), changes to the actual act of playing the lottery (even things as simple as purchasing process can have profound effects on how people get their "hit" from gambling).
Look at cigarettes, they're still legal, yet through policy America has gone from a country where the vast majority of adults smoked (almost 70%), to one where less than 15% of the population does.
Now this being HN I need to put the disclaimer that I'm not saying every piece of tobacco legislation maps perfectly to gambling if you Ctrl+F replace... but it shows how truly vast the gully between banning something and letting it proliferate is.
If there was truly interest in helping these people there are countless levers that could be used to try and balance the scale. But there's the perverse combination of financial incentive to do nothing, and political disincentive to do anything as long as politicians can get away with their treatment of these people.
But there is so much that could be done to try and limit the damage it's doing to poorer populations, and increase the good it's doing for those populations at the same time.
Bans and restrictions on advertising lotteries, limiting points of sale per sq. mi., actually using the funds as claimed when instated, focusing on the types of gambling and their effect on addiction rates (https://www.psychologytoday.com/us/blog/in-excess/202003/pro...), changes to the actual act of playing the lottery (even things as simple as purchasing process can have profound effects on how people get their "hit" from gambling).
Look at cigarettes, they're still legal, yet through policy America has gone from a country where the vast majority of adults smoked (almost 70%), to one where less than 15% of the population does.
Now this being HN I need to put the disclaimer that I'm not saying every piece of tobacco legislation maps perfectly to gambling if you Ctrl+F replace... but it shows how truly vast the gully between banning something and letting it proliferate is.
If there was truly interest in helping these people there are countless levers that could be used to try and balance the scale. But there's the perverse combination of financial incentive to do nothing, and political disincentive to do anything as long as politicians can get away with their treatment of these people.
But cigarettes are an extreme example of a tax on the poor, just like lotteries. From your rhetoric, I would have imagined that you would be against the aggressive taxation on cigarettes. I know I am.
I even gave the disclaimer it's own paragraph.
At least the lottery or casinos are honest in the sense that you know you're playing a gamble. I'm not a fan either, but it that's what people want to do ... shrug
The biggest problem I have with Herbalife and similar companies is that they're dishonest and deceitful. It's not even a gamble, it's just a fraud.
The biggest problem I have with Herbalife and similar companies is that they're dishonest and deceitful. It's not even a gamble, it's just a fraud.
Great point. What's the rationale for allowing governments to run lotteries? How can governments serve the interest of the people while running a gambling racket against the people? Isn't it shocking that governments are running lotteries rather than casinos? It would be like governments selling soda to the public rather than private companies.
why do we never give agency to people? is your mother an automaton that simply reacts to inputs or does she have any ability to not buy lottery tickets?
I agree with you on the lottery, the world would be better off without it. The problem in this case is that it's also entertainment, and people will pursue it whether it's legal or not because they want to gamble. In this case if we have to have it, I'd rather have the government run it than a for-profit company.
Herbalife (and other MLM) are just straight fraud. Pyramid schemes are illegal in most countries, but companies like Herbalife manage to squeak by. My guess would be it's because of money, but really I have no idea how they get away with it.
Herbalife (and other MLM) are just straight fraud. Pyramid schemes are illegal in most countries, but companies like Herbalife manage to squeak by. My guess would be it's because of money, but really I have no idea how they get away with it.
Herbalife actually makes (labels?) products that are decent enough, so I don’t think you can outright call it fraud.
The seller structure is definitely a pyramid scheme, but I’m not convinced that alone is reason enough for it to be illegal. It’s mindbogglingly stupid, of course. But consenting adults should be free to be as stupid as they want, provided they’re not harming anyone else or doing irreparable damage to themselves.
The seller structure is definitely a pyramid scheme, but I’m not convinced that alone is reason enough for it to be illegal. It’s mindbogglingly stupid, of course. But consenting adults should be free to be as stupid as they want, provided they’re not harming anyone else or doing irreparable damage to themselves.
With all kindness meant towards your mother, does she buy a fixed number of ticket(s) every week, or does she buy as many as she can?
I think the lottery and MLM both tap into the same dreams, but a key difference is that the lotto ends at the cheap thrill, while MLM is a spiral that sucks you down forever.
The lottery is tolerated because it raises revenue without raising taxes. Here in California, ending the lotto means cutting public school funding. I would welcome higher taxes to end the lotto, but politics is politics.
I think the lottery and MLM both tap into the same dreams, but a key difference is that the lotto ends at the cheap thrill, while MLM is a spiral that sucks you down forever.
The lottery is tolerated because it raises revenue without raising taxes. Here in California, ending the lotto means cutting public school funding. I would welcome higher taxes to end the lotto, but politics is politics.
Because there is loud grumbling about a "nanny state" when government prevents people from making probably-stupid business decisions. Multi-level marketing, initial coin offerings, allowing people without much money to invest in startups, and casino gambling all lead to most people losing their money.
I think the “nanny state” concept is poorly calibrated. If you allow entities to profit from causing harm, or conveniently shift the cost of negative externalities onto other people, day to day life will eventually become so adversarial that it is unliveable. This seems to be happening already, as we are inundated with scam texts, emails and phone calls; children are under siege from social media, the fast food industry, Juul; whole regions are routed by the opioid crisis; tobacco related diseases are still one of the top causes of death; the fossil fuel industry keeps edging us closer to varying degrees of annihilation.
I have no idea how you're supposed to find this organically; Here's the PDF that tells the tale:
https://opportunity.herbalife.com/Content/en-US/pdf/business...
In 2011, in the US ~351,000 people were on the roles as individual sellers. The pdf even acknowledges "Single-level Distributors benefit from buying Herbalife products at a preferred price for their consumption and that of their families, and for many this is the only benefit they seek."
Those 351,000 people are the product for the "Supervisors"
Here's another one for 2013: https://opportunity.herbalife.com/Content/en-US/pdf/business...
400,000 people who earned nothing at all from herbalife as individual sellers (they could potentially profit from selling product, but that's quite rare, it looks like 50,000 people bought more than the minimum [see footnote in pdf]).
Next, 43,000 people who could potentially earn money from their downline (see the 400,000 chumps above); but only 2,300 actually did earn anything at all.
Next, the actual winners in the pyramid: 73,000 people at the top. But wait, 18 percent earned $0 and another 56% earned $250 on average. So how many people in the pyramid earn above minimum wage? Something like 2,600 people.
https://opportunity.herbalife.com/Content/en-US/pdf/business...
In 2011, in the US ~351,000 people were on the roles as individual sellers. The pdf even acknowledges "Single-level Distributors benefit from buying Herbalife products at a preferred price for their consumption and that of their families, and for many this is the only benefit they seek."
Those 351,000 people are the product for the "Supervisors"
Here's another one for 2013: https://opportunity.herbalife.com/Content/en-US/pdf/business...
400,000 people who earned nothing at all from herbalife as individual sellers (they could potentially profit from selling product, but that's quite rare, it looks like 50,000 people bought more than the minimum [see footnote in pdf]).
Next, 43,000 people who could potentially earn money from their downline (see the 400,000 chumps above); but only 2,300 actually did earn anything at all.
Next, the actual winners in the pyramid: 73,000 people at the top. But wait, 18 percent earned $0 and another 56% earned $250 on average. So how many people in the pyramid earn above minimum wage? Something like 2,600 people.
This is reassuring, if anything. Those numbers make it sound like it's mostly just a business with an unusual sales and marketing mechanism. The vast majority of the customers aren't taking part in the "pyramid scheme" part of the enterprise. They're just buying herbal supplements because they make them feel better or maybe their neighbour pressured then into it. All slightly skeezy but no worse than most retail businesses selling discretionary items.
It would be much worse for society if most of the "individual sellers" were buying large quantities of the useless product, intending to sell it on but never being able to.
What proportion of people in the distribution/consumption pyramid for Coke earn above minimum wage from distributing or consuming Coke? Surely a lot fewer.
It would be much worse for society if most of the "individual sellers" were buying large quantities of the useless product, intending to sell it on but never being able to.
What proportion of people in the distribution/consumption pyramid for Coke earn above minimum wage from distributing or consuming Coke? Surely a lot fewer.
>The vast majority of the customers aren't taking part in the "pyramid scheme" part of the enterprise. They're just buying herbal supplements because they make them feel better or maybe their neighbour pressured then into it. All slightly skeezy but no worse than most retail businesses selling discretionary items.
That's one interpretation. The other interpretation is that herbalife has reached a saturation point where there aren't any suckers to sign up anymore, and all the "customers aren't taking part in the 'pyramid scheme'" are just the bag holders.
That's one interpretation. The other interpretation is that herbalife has reached a saturation point where there aren't any suckers to sign up anymore, and all the "customers aren't taking part in the 'pyramid scheme'" are just the bag holders.
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I'm guessing all those people buying it at the bottom are doing so to meet monthly minimums. Judging by my experience trying the product, I can't imagine people really want it that bad.
Herbalife's products work, but they're just vitamins, and a protein shake with vitamins. It's nothing special compared to the hundreds of competing products that exist...today.
But when it was founded 4 decades ago...there weren't any products like it on the market. It basically created the market, and it's had 4 decades to expand internationally into countries where there is similarly little to no competition. It's basically the McDonalds of protein shakes.
Herbalife stays in business because most of the "distributors" (in the US) are just end customers who buy in bulk at the "distributor" discount, which is why so many of them don't try to sell it on to others. And that was pretty much what the FTC concluded when they investigated Herbalife. (But note: Herbalife was determined to have operated as a pyramid scheme in several Latin American countries, and was forced to reorganize its operations in those countries.)
But when it was founded 4 decades ago...there weren't any products like it on the market. It basically created the market, and it's had 4 decades to expand internationally into countries where there is similarly little to no competition. It's basically the McDonalds of protein shakes.
Herbalife stays in business because most of the "distributors" (in the US) are just end customers who buy in bulk at the "distributor" discount, which is why so many of them don't try to sell it on to others. And that was pretty much what the FTC concluded when they investigated Herbalife. (But note: Herbalife was determined to have operated as a pyramid scheme in several Latin American countries, and was forced to reorganize its operations in those countries.)
>But when it was founded 4 decades ago...there weren't any products like it on the market.
Nonsense.
There have been vitamins and protein drinks sold in stores for over 50 years. Every drug store and most grocery stores carried vitamins since the 1940s. The One-A-Day multivitamin brand appeared in 1943. My parents were born in the 1940s and they took vitamins as children. I was born in the 1960s and I took Flintstones Kids vitamins, which ere introduced in 1968.
Protein powders started showing up in drug and health food stores in the 1950s with the advent of body building becoming popular. GNC was started in the 1930s and was in every major mall across America in the 1970s, and they sold protein drinks, both liquid and powder. Remember Charles Atlas? Probably not. There have been multiple health food fads throughout American history.
Herbalife stays in business because people are gullible. The multi-level marketing business model appeals to our greed and fear of missing a good deal. None of the products offered by Tupperware, Avon, Mary Kay, Fuller Brush, Amway, and Primerica are unique in anyway and the only people getting rich are towards the top of the pyramid.
Nonsense.
There have been vitamins and protein drinks sold in stores for over 50 years. Every drug store and most grocery stores carried vitamins since the 1940s. The One-A-Day multivitamin brand appeared in 1943. My parents were born in the 1940s and they took vitamins as children. I was born in the 1960s and I took Flintstones Kids vitamins, which ere introduced in 1968.
Protein powders started showing up in drug and health food stores in the 1950s with the advent of body building becoming popular. GNC was started in the 1930s and was in every major mall across America in the 1970s, and they sold protein drinks, both liquid and powder. Remember Charles Atlas? Probably not. There have been multiple health food fads throughout American history.
Herbalife stays in business because people are gullible. The multi-level marketing business model appeals to our greed and fear of missing a good deal. None of the products offered by Tupperware, Avon, Mary Kay, Fuller Brush, Amway, and Primerica are unique in anyway and the only people getting rich are towards the top of the pyramid.
A bodybuilder like Charles Atlas or Arnold Schwarzenegger would not have been caught dead drinking protein shakes in the glory days of bodybuilding (i.e., the 1970s/1980s); they preferred real foods, and Atlas was a strong proponent of a milk-heavy diet (and even advocated for a milk-only diet during bulking phases). https://physicalculturestudy.com/2014/12/08/charles-atlass-s...
Thus, 40 years ago (i.e., 1980), using protein powder for weight loss/body composition wasn't a big market. Herbalife created that market. GNC and others started selling protein powders for weight loss and bodybuilding after Herbalife proved the viability of the niche. (Note: protein powder is the cheapest form of protein...today. It wasn't back then. It was comparatively quite expensive. In the 80s, beef and chicken were far cheaper than protein powder.)
If you want to debate exercise history you will want to pick a fight with someone who doesn't have GNC and other health companies as clients...
Thus, 40 years ago (i.e., 1980), using protein powder for weight loss/body composition wasn't a big market. Herbalife created that market. GNC and others started selling protein powders for weight loss and bodybuilding after Herbalife proved the viability of the niche. (Note: protein powder is the cheapest form of protein...today. It wasn't back then. It was comparatively quite expensive. In the 80s, beef and chicken were far cheaper than protein powder.)
If you want to debate exercise history you will want to pick a fight with someone who doesn't have GNC and other health companies as clients...
> A bodybuilder like Charles Atlas or Arnold Schwarzenegger would not have been caught dead drinking protein shakes in the glory days of bodybuilding
The glory days for Charles Atlas was the 1920s to 1940s; he died in 1972. He had sponsorship deals for dietary supplements.
>Thus, 40 years ago (i.e., 1980), using protein powder for weight loss/body composition wasn't a big market.
It was a large market by the by the 1960s. Many famous bodybuilders from the 1920s through 1950s started advocating protein drinks made with dehydrated and pulverized beef, egg, and milk. All the fitness, bodybuilding, and martial arts magazines were filled with protein drink advertising in the 1960s and 1970s. Hell, even Chuck Norris was hawking this stuff in the 70s. You could walk into any GNC in the 1960s and buy this product.
The only thing HerbalLife added was marketing, finding suckers to sell their products.
The glory days for Charles Atlas was the 1920s to 1940s; he died in 1972. He had sponsorship deals for dietary supplements.
>Thus, 40 years ago (i.e., 1980), using protein powder for weight loss/body composition wasn't a big market.
It was a large market by the by the 1960s. Many famous bodybuilders from the 1920s through 1950s started advocating protein drinks made with dehydrated and pulverized beef, egg, and milk. All the fitness, bodybuilding, and martial arts magazines were filled with protein drink advertising in the 1960s and 1970s. Hell, even Chuck Norris was hawking this stuff in the 70s. You could walk into any GNC in the 1960s and buy this product.
The only thing HerbalLife added was marketing, finding suckers to sell their products.
I'm struck by the unwillingness of people to say they don't know what's going on. But total disagreement on what's going on implies nobody really knows.
People have written an enormous amount on why HLF is/isn't a pyramid scheme. Yet it hasn't gone to zero yet. At the same time, it looks and smells fishy and people seem to agree the products are commodities. So how can it not be a scam?
It seems to me like the logical inference is that there is something hidden below the surface and that even with all the time Ackman and others put into researching it, there's something not public sustaining it.
Even if it's just a pyramid scheme, the mystery deepens, because some people who don't seem to be shills have written an unbelievable amount defending it.
People have written an enormous amount on why HLF is/isn't a pyramid scheme. Yet it hasn't gone to zero yet. At the same time, it looks and smells fishy and people seem to agree the products are commodities. So how can it not be a scam?
It seems to me like the logical inference is that there is something hidden below the surface and that even with all the time Ackman and others put into researching it, there's something not public sustaining it.
Even if it's just a pyramid scheme, the mystery deepens, because some people who don't seem to be shills have written an unbelievable amount defending it.
MLM = product sold by multiple levels of distributors.
Pyramid scheme = an MLM in which most income at any level is from sales that end with lower-levels rather than ultimately ending with actual customers.
The FTC investigated Herbalife in 2016, concluding in 2018, and determined that more than 80% of ultimate product sales were to individuals outside of their distributor network...even though their distributor figures were inflated by "distributors" that were just customers purchasing product for personal use at the highly-discounted distributor rate.
Herbalife is an MLM, but it's not legally a pyramid scheme, and the agency that investigates this (the FTC) said as much in 2018. (It did, however, fine Herbalife $$$ for practices that would have resulted in Herbalife being a pyramid scheme if the majority of its product didn't actually get sold to non-distributors.)
Pyramid scheme = an MLM in which most income at any level is from sales that end with lower-levels rather than ultimately ending with actual customers.
The FTC investigated Herbalife in 2016, concluding in 2018, and determined that more than 80% of ultimate product sales were to individuals outside of their distributor network...even though their distributor figures were inflated by "distributors" that were just customers purchasing product for personal use at the highly-discounted distributor rate.
Herbalife is an MLM, but it's not legally a pyramid scheme, and the agency that investigates this (the FTC) said as much in 2018. (It did, however, fine Herbalife $$$ for practices that would have resulted in Herbalife being a pyramid scheme if the majority of its product didn't actually get sold to non-distributors.)
I get that. I was just reading John Hempton's long blog post in defense of it, and someone in the comments pointed out that the bulletin board behind some people he photographed, was all about classes on MLM, not about health club type activities.
So I'm saying, yes, at some level it checked out for him and the FTC, but I'm still left wondering if it is what it seems, ironically due to reading the long defense and feeling it had gaps.
So I'm saying, yes, at some level it checked out for him and the FTC, but I'm still left wondering if it is what it seems, ironically due to reading the long defense and feeling it had gaps.
I read the defense as well, and the biggest gap to me was the people not in the room, literally. The people who show up to the club are happy enough, but not everyone shows up to the club.
Multi-level schemes are configured in order to benefit the people at the top. That is why they were created.
Well I think it's pretty simple - MLM companies contribute more in political funding, than than the perceived detrimental aspects of their business hurt the electoral prospects of our elected representatives.
As a token example - https://en.wikipedia.org/wiki/Betsy_DeVos
As a token example - https://en.wikipedia.org/wiki/Betsy_DeVos
The premise is exactly backwards. Why should the government be able to put a company like Herbalife out of business? Adults should be able to decide for themselves whether to buy products. If they make mistakes by our judgement, which is always very imperfect, that is their business.
"Adults should be able to avoid scams/fraud" is a policy that only enriches scammers and fraudsters.
There is zero upside to society for people to be parted from their money (further, for scammers to receive that money) because they don't know about every single scam or because they were unable to do adequate research. Btw, Herbalife points to the fact that it's not shut down as evidence that it's legit. And its onboarding process is 100% high-pressure sales wringer to make you feel like you're about to make big money.
This crap is even more in-the-open here in Mexico, the same country with homeopathy "pharmacies" on every block staffed by people in white lab coats ready to sell you a vial of water that will cure your cancer.
There is zero upside to society for people to be parted from their money (further, for scammers to receive that money) because they don't know about every single scam or because they were unable to do adequate research. Btw, Herbalife points to the fact that it's not shut down as evidence that it's legit. And its onboarding process is 100% high-pressure sales wringer to make you feel like you're about to make big money.
This crap is even more in-the-open here in Mexico, the same country with homeopathy "pharmacies" on every block staffed by people in white lab coats ready to sell you a vial of water that will cure your cancer.
You have misunderstood. The victims here are not consumers, they are the employees - the sales agents.
The main activity of Herbalife is recruiting. A Herbalife job posting may talk about selling supplements. But if you work for Herbalife, your real job is to find more people to work for Herbalife. The supplement sales are only a cover.
The reason these companies should be put out of business is that they are pyramid scams, frauds to their very core.
The main activity of Herbalife is recruiting. A Herbalife job posting may talk about selling supplements. But if you work for Herbalife, your real job is to find more people to work for Herbalife. The supplement sales are only a cover.
The reason these companies should be put out of business is that they are pyramid scams, frauds to their very core.
Because Herbalife is not a legitimate business, it's a pyramid scheme with just enough details tweaked to not quite count as one under existing legislation.
Do you think people should be able to buy in to Ponzi schemes, or give money to people running three card monte games on the roadside too?
Do you think people should be able to buy in to Ponzi schemes, or give money to people running three card monte games on the roadside too?
Ponzi schemes require deception and fraud. Unless Herbalife is defrauding people, which MLM’s typically do not, there is no comparison.
They are an inefficient allocation of resources for the person investing their time and money, but the same could be said of many, many other endeavors.
I’d rather resource be spent to teach people how to properly calculate ROI and IRR.
They are an inefficient allocation of resources for the person investing their time and money, but the same could be said of many, many other endeavors.
I’d rather resource be spent to teach people how to properly calculate ROI and IRR.
Bill Ackman of Pershing Square tried really hard to publicize their shittiness for his massive short bet on Herbalife. There's even a documentary about it. Never seemed to work. Not sure how much he lost in the trade, but a tidy sum, to say the least.
Of course it didn't help that Carl Icahn was on the other side of the trade. Herbalife's stock has done really well for a company that sells no real product and has no real value.
Of course it didn't help that Carl Icahn was on the other side of the trade. Herbalife's stock has done really well for a company that sells no real product and has no real value.
See this link (previously at https://news.ycombinator.com/item?id=9714417 on HN) for a different take on Herbalife (by a short seller who went long on Herbalife and made quite a bit of money).
http://brontecapital.blogspot.com/2015/06/herbalife-very-lon...
http://brontecapital.blogspot.com/2015/06/herbalife-very-lon...
That was a great read, thanks!
A lot of it simply comes down to how much you want government to police behavior. There is only so much irrationality that can be reined in.
There are also legitimate home based businesses. Government regulations tend to not be very good at telling the difference between legitimate operations and those which are sketchy, but not outright fraud.
There are also legitimate home based businesses. Government regulations tend to not be very good at telling the difference between legitimate operations and those which are sketchy, but not outright fraud.
>A lot of it simply comes down to how much you want government to police behavior.
Individual behavior: As little as is demonstrably necessary.
Corporate behavior: Every bit that shapes capitalism into being benign & overtly beneficial - including police intervention for those on the receiving end of law-changing campaign donations.
Individual behavior: As little as is demonstrably necessary.
Corporate behavior: Every bit that shapes capitalism into being benign & overtly beneficial - including police intervention for those on the receiving end of law-changing campaign donations.
I don’t know why Herbalife, Amway, Primerica and all the MLM pyramid schemes are technically legal and allowed to exist.
To play devil's advocate, with people tied up in legal pyramid schemes there's some degree of oversight and public scrutiny. The companies can't egregiously screw too many people too bad. Anybody who does a little homework can see that it's a scam because there's a small number of the schemes around, and Coffezilla has talked about them all ad-nauseum. Vs. if those people were tied up in illegal/underground pyramid schemes, those schemes might be 1,000x more predatory and exploitative.
Like payday loans. They're horrible and predatory, but they'll only take your car, not break your kneecaps if you can't pay.
Addressing market failure in the United States is more damage control and harm reduction than anything. Our Chesterton's fences are in the form of duct tape on top of duct tape.
Like payday loans. They're horrible and predatory, but they'll only take your car, not break your kneecaps if you can't pay.
Addressing market failure in the United States is more damage control and harm reduction than anything. Our Chesterton's fences are in the form of duct tape on top of duct tape.
We’re not in the nutritional supplements business. We’re in the empire business.
For a harrowing, tragic, and hilarious MLM story, read Elle Beau's blog, it's a treasure: https://ellebeaublog.com/poonique/
People tip-toe around calling MLM what it is, specifically a scam using psychological tactics of a cult. For example, Dave Ramsey (host of a highly popular financial radio show and podcast) condemns credit cards in fiery rants, but uses carefully measured terms when talking about MLM. "Most people lose money, but a few can be very successful..."
Something about MLM gets people scared to tell the truth. I think that everyone knows a friend or family member in MLM, and don't want to risk that relationship. Of course that's what MLM preys on.
People tip-toe around calling MLM what it is, specifically a scam using psychological tactics of a cult. For example, Dave Ramsey (host of a highly popular financial radio show and podcast) condemns credit cards in fiery rants, but uses carefully measured terms when talking about MLM. "Most people lose money, but a few can be very successful..."
Something about MLM gets people scared to tell the truth. I think that everyone knows a friend or family member in MLM, and don't want to risk that relationship. Of course that's what MLM preys on.
I mean, Dave's not wrong. If you had a few beers with folks in an MLM who kind of know the deal, what percentage would admit to hoping to be one of the 'got in early and made some money' folks without being too terribly concerned about those at the bottom of the pyramid getting fleeced.
Paywall: https://archive.is/ya5D9
Season 1 of The Dream podcast is an easy and informative look at mlm.
https://www.stitcher.com/podcast/stitcher/the-dream
Why does it stay in business? Because there is nothing wrong with a company that exploits the greed of individuals. Yes, some people are compelled due to desperate situations. But the solution here is raising the education level high enough to not succumb to their inner greed. The solution isn't reactively outlawing knives that cut more people than others.