4 ms·

Enron is one example of how these things can turn out, but Herbalife (HLF) is another. HLF is a multi-level marketing company; they're a shady company in an inh

Enron is one example of how these things can turn out, but Herbalife (HLF) is another. HLF is a multi-level marketing company; they're a shady company in an inherently shady business; they have far-flung operations; they aggressively went after people expressing negative information; they had questionable accounting; and there were eventually regulatory rulings against them. But they also are a profitable business that sells stuff that people want to buy. They started getting a lot of press over being a fraud in 2012, today the stock is 30% higher than the 2012 peak, and Bill Ackman lost around $1B shorting it before he gave up. "Fake it til you make it" isn't just for tech startups. A lot of companies juice results with a bit of fraud, but eventually get good real results anyway. It's hard to tell the difference between an outright fraud and a healthy company with aggressive accounting.

paganel 6y ago
I'm no Bill Ackman but I still do think that Herbalife is a fraud. It's basically just a better marketed MLM company, I first realised about the MLM part 12 or 13 years ago when I went to one of their presentations in my city (got out as soon as I could), which I guess leaves them with the "better marketing" part, which I admit they're pretty good at (if I'm not mistaken at some point they were sponsoring the football team AC Milan and the football player David Beckham).
Nextgrid 6y ago
> they also are a profitable business that sells stuff that people want to buy [citation needed] Just like the other MLMs (or rather pyramid schemes, because that's what they really are), they sell a (unprofitable) lifestyle using deceptive marketing. The products are secondary (they're just there to keep regulators at bay) and are always sub-par and inferior to what can be found off-the-shelf.
- intuitionist 6y ago
  There’s nothing illegal, or inherently unprofitable (for the business), about selling people a lifestyle. Louis Vuitton sells people a lifestyle. Harley-Davidson sells people a lifestyle. Apple sells people a lifestyle. All of these companies have products, sure, but the products aren’t really the point.
  - mrmuagi 6y ago
    It is illegal when the product makes serious health claims not backed by scientific research. The more insidious cases of this relate to cancer or covid 'cures'.
  - Nextgrid 6y ago
    Louis Vuitton, Harley Davidson, etc do not give people the illusion of owning their business and do not encourage them to stockpile garbage products in their garage to keep their "status" in their "business". They do not encourage people to con their friends & family into the scam either. Furthermore, most of these luxury goods have actual value. Even if you are stupid enough to go into tons of debt and fill your garage with Harleys, there will be plenty of buyers who will be happy to take it from you at a small loss. In comparison, nobody will buy a garage full of Herbalife - the cost of shipping would be more expensive than the market value of the product itself.
pjc50 6y ago
The ftalphaville coverage of Herbalife has been consistently interesting, e.g. https://ftalphaville.ft.com/2016/07/18/2169979/herbalife-avoiding-the-p-word/ https://ftalphaville.ft.com/2016/07/18/2169979/herbalife-avo...

paganel 6y ago

I'm no Bill Ackman but I still do think that Herbalife is a fraud. It's basically just a better marketed MLM company, I first realised about the MLM part 12 or 13 years ago when I went to one of their presentations in my city (got out as soon as I could), which I guess leaves them with the "better marketing" part, which I admit they're pretty good at (if I'm not mistaken at some point they were sponsoring the football team AC Milan and the football player David Beckham).

Nextgrid 6y ago

> they also are a profitable business that sells stuff that people want to buy [citation needed] Just like the other MLMs (or rather pyramid schemes, because that's what they really are), they sell a (unprofitable) lifestyle using deceptive marketing. The products are secondary (they're just there to keep regulators at bay) and are always sub-par and inferior to what can be found off-the-shelf.

intuitionist 6y ago
There’s nothing illegal, or inherently unprofitable (for the business), about selling people a lifestyle. Louis Vuitton sells people a lifestyle. Harley-Davidson sells people a lifestyle. Apple sells people a lifestyle. All of these companies have products, sure, but the products aren’t really the point.
- mrmuagi 6y ago
  It is illegal when the product makes serious health claims not backed by scientific research. The more insidious cases of this relate to cancer or covid 'cures'.
- Nextgrid 6y ago
  Louis Vuitton, Harley Davidson, etc do not give people the illusion of owning their business and do not encourage them to stockpile garbage products in their garage to keep their "status" in their "business". They do not encourage people to con their friends & family into the scam either. Furthermore, most of these luxury goods have actual value. Even if you are stupid enough to go into tons of debt and fill your garage with Harleys, there will be plenty of buyers who will be happy to take it from you at a small loss. In comparison, nobody will buy a garage full of Herbalife - the cost of shipping would be more expensive than the market value of the product itself.

pjc50 6y ago

The ftalphaville coverage of Herbalife has been consistently interesting, e.g. https://ftalphaville.ft.com/2016/07/18/2169979/herbalife-avoiding-the-p-word/ https://ftalphaville.ft.com/2016/07/18/2169979/herbalife-avo...