8 ms·

Why does the government let a company like Herbalife stay in business?

83 points by xoxoy 6y ago

hervature 6y ago
> Nevertheless, Herbalife recruiting materials were festooned with “images of expensive cars and opulent mansions.” 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.
- aj7 6y ago
  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.
- awinder 6y ago
  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.
- smnrchrds 6y ago
  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.
  - netsharc 6y ago
    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 https://en.wikipedia.org/wiki/Caveat_emptor .
- liability 6y ago
  > 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.
  - smabie 6y ago
    I mean, morality is an opinion, so it doesn't really make sense to try and correct someone about it.
    - liability 6y ago
      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.
    - nathan_compton 6y ago
      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.
  - matz1 6y ago
    Morality is subjective, maybe its wrong to you but may not wrong for me.
ggm 6y ago
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.
- gruez 6y ago
  >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)?
  - ggm 6y ago
    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.
lootsauce 6y ago
Can you say reg-u-la-tory cap—ture
lefstathiou 6y ago
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.
- arp242 6y ago
  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.
- smabie 6y ago
  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).
  - protomyth 6y ago
    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.
stevespang 6y ago
Conflict of interest ? Why does the Gov't allow lawyers, real estate agents, doctors and so many other professions to promote/engage their services such that they benefit having the client / patient spending money with them yet there is never any guarantee of successful result for the client/patient ?
Animats 6y ago
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.
- Gatsky 6y ago
  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.
csours 6y ago
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-opportunity/StatementAverageCompensation2011EN.pdf 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-opportunity/statement_average_gross_usen.pdf 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.
- IncRnd 6y ago
  Multi-level schemes are configured in order to benefit the people at the top. That is why they were created.
- dmurray 6y ago
  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.
goldcd 6y ago
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 https://en.wikipedia.org/wiki/Betsy_DeVos
baggy_trough 6y ago
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.
- p1necone 6y ago
  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?
  - lotsofpulp 6y ago
    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.
- hombre_fatal 6y ago
  "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.
- millstone 6y ago
  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.
smabie 6y ago
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.
- csin 6y ago
  https://en.wikipedia.org/wiki/Betting_on_Zero https://en.wikipedia.org/wiki/Betting_on_Zero
MaysonL 6y ago
See this link (previously at https://news.ycombinator.com/item?id=9714417 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-long-post.html http://brontecapital.blogspot.com/2015/06/herbalife-very-lon...
- zaroth 6y ago
  That was a great read, thanks!
MattGaiser 6y ago
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.
- WarOnPrivacy 6y ago
  >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.
reiichiroh 6y ago
I don’t know why Herbalife, Amway, Primerica and all the MLM pyramid schemes are technically legal and allowed to exist.
- phobosanomaly 6y ago
  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.
pyuser583 6y ago
We’re not in the nutritional supplements business. We’re in the empire business.
millstone 6y ago
For a harrowing, tragic, and hilarious MLM story, read Elle Beau's blog, it's a treasure: https://ellebeaublog.com/poonique/ 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.
- phobosanomaly 6y ago
  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.
Nuzzerino 6y ago
Paywall: https://archive.is/ya5D9 https://archive.is/ya5D9
bruceb 6y ago
Season 1 of The Dream podcast is an easy and informative look at mlm. https://www.stitcher.com/podcast/stitcher/the-dream https://www.stitcher.com/podcast/stitcher/the-dream

83 points by xoxoy 6y ago

> Nevertheless, Herbalife recruiting materials were festooned with “images of expensive cars and opulent mansions.” 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.

aj7 6y ago
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.
awinder 6y ago
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.
smnrchrds 6y ago
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.
- netsharc 6y ago
  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 https://en.wikipedia.org/wiki/Caveat_emptor .
liability 6y ago
> 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.
- smabie 6y ago
  I mean, morality is an opinion, so it doesn't really make sense to try and correct someone about it.
  - liability 6y ago
    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.
  - nathan_compton 6y ago
    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.
- matz1 6y ago
  Morality is subjective, maybe its wrong to you but may not wrong for me.

ggm 6y ago

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.

gruez 6y ago
>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)?
- ggm 6y ago
  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.

lootsauce 6y ago

Can you say reg-u-la-tory cap—ture

lefstathiou 6y ago

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.

arp242 6y ago
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.
smabie 6y ago
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).
- protomyth 6y ago
  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.

stevespang 6y ago

Conflict of interest ? Why does the Gov't allow lawyers, real estate agents, doctors and so many other professions to promote/engage their services such that they benefit having the client / patient spending money with them yet there is never any guarantee of successful result for the client/patient ?

Animats 6y ago

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.

Gatsky 6y ago
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.

csours 6y ago

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-opportunity/StatementAverageCompensation2011EN.pdf 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-opportunity/statement_average_gross_usen.pdf 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.

IncRnd 6y ago
Multi-level schemes are configured in order to benefit the people at the top. That is why they were created.
dmurray 6y ago
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.

goldcd 6y ago

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 https://en.wikipedia.org/wiki/Betsy_DeVos

baggy_trough 6y ago

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.

p1necone 6y ago
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?
- lotsofpulp 6y ago
  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.
hombre_fatal 6y ago
"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.
millstone 6y ago
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.

smabie 6y ago

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.

csin 6y ago
https://en.wikipedia.org/wiki/Betting_on_Zero https://en.wikipedia.org/wiki/Betting_on_Zero

MaysonL 6y ago

See this link (previously at https://news.ycombinator.com/item?id=9714417 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-long-post.html http://brontecapital.blogspot.com/2015/06/herbalife-very-lon...

zaroth 6y ago
That was a great read, thanks!

MattGaiser 6y ago

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.

WarOnPrivacy 6y ago
>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.

reiichiroh 6y ago

I don’t know why Herbalife, Amway, Primerica and all the MLM pyramid schemes are technically legal and allowed to exist.

phobosanomaly 6y ago
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.

pyuser583 6y ago

We’re not in the nutritional supplements business. We’re in the empire business.

millstone 6y ago

For a harrowing, tragic, and hilarious MLM story, read Elle Beau's blog, it's a treasure: https://ellebeaublog.com/poonique/ 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.

phobosanomaly 6y ago
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.

Nuzzerino 6y ago

Paywall: https://archive.is/ya5D9 https://archive.is/ya5D9

bruceb 6y ago

Season 1 of The Dream podcast is an easy and informative look at mlm. https://www.stitcher.com/podcast/stitcher/the-dream https://www.stitcher.com/podcast/stitcher/the-dream