Nice pyramid you've got there, be a shame if something happened to it...
December 25, 2012 6:06 AM Subscribe
Pershing Square Capital's CEO Bill Ackman Takes On Herbalife.
Pershing Square Capital Management has published a web site (initial disclaimer requires agreement) that provides the public with information about the MLM company Herbalife, including a trove of original source materials that substantiate the firm's accusation that Herbalife, a publicly traded company (ticker symbol HLF) with a market capitalization of over 8 billion dollars, operates as a illegal "pyramid scheme." Pershing Square CEO and "activist investor" Bill Ackman's investigation is available as a (10mb) PDF of a massive PowerPoint presentation, or as a webcast presentation. (Webcast requires registration; PDF, amusingly titled "Who wants to be a millionaire?", is freely downloadable and contains over 300 slides).
Pershing Square's "Facts About Herbalife" website includes:
"Herbalife distributor presentations, recruiting scripts and presentations, distributor lifestyle videos, nutrition club photos, third-party investigative reports, Herbalife Today magazines, court hearing and deposition transcripts, archival video and other materials on the history of the company, lead generation systems, SEC correspondence, and other data that will assist the public in understanding the facts about Herbalife."
From the Forbes article (same as primary FPP link above) by Helaine Olen:
"[Ackman, CEO of the Pershing Square investment firm] claims his ultimate goal is not to profit from his short position – he’s announced he’s giving all money he earns from it to charity – but that he would like the federal government to shut Herbalife’s 32-year-old nutritional supplement business down. 'A lot of people have been harmed here,' he said in an interview with Bloomberg last week. Needless to say, Herbalife is crying foul, and Herbalife Chief Executive Officer Michael Johnson says he will respond to what he describes as 'blatant market manipulation' by Ackman in an day to be held in early January, 2013."
This follows an May 1, 2012 episode where David Einhorn, a prominent hedge fund manager for Greenlight Capital, raised similar questions in a conference call with Herbalife investors.
For further commentary on Herbalife, see "Deja Vu's" Dec. 23 article on SeekingAlpha.com: "But Mr. Ackman, Herbalife is a Sustainable Pyramid Scheme", which points out:
"[Herbalife's] 'innovation' of blaming the victim for not getting paid back allows Herbalife to import a steady supply of new victims each year, suck them dry and discard them. Much like a ravenous herd that grazes a range down to the bare ground and moves on to the next grassland, Herbalife sustains itself by moving from one demographic group to the next - African Americans, Koreans, Chinese, stay at home moms, college students, etc. Herbalife sucks each group dry over a period of years and then moves on to the next. This explains how Herbalife has stayed in business for 32 years in the US. Internationally, it's much simpler, Herbalife simply moves on from one set of countries to the next."
(Deja Vu, an anonymous author for Seeking Alpha who claims to be a CEO of a medical device company, also discloses a short position in Herbalife, FWIW.)
Pershing Square Capital Management has published a web site (initial disclaimer requires agreement) that provides the public with information about the MLM company Herbalife, including a trove of original source materials that substantiate the firm's accusation that Herbalife, a publicly traded company (ticker symbol HLF) with a market capitalization of over 8 billion dollars, operates as a illegal "pyramid scheme." Pershing Square CEO and "activist investor" Bill Ackman's investigation is available as a (10mb) PDF of a massive PowerPoint presentation, or as a webcast presentation. (Webcast requires registration; PDF, amusingly titled "Who wants to be a millionaire?", is freely downloadable and contains over 300 slides).
Pershing Square's "Facts About Herbalife" website includes:
"Herbalife distributor presentations, recruiting scripts and presentations, distributor lifestyle videos, nutrition club photos, third-party investigative reports, Herbalife Today magazines, court hearing and deposition transcripts, archival video and other materials on the history of the company, lead generation systems, SEC correspondence, and other data that will assist the public in understanding the facts about Herbalife."
From the Forbes article (same as primary FPP link above) by Helaine Olen:
"[Ackman, CEO of the Pershing Square investment firm] claims his ultimate goal is not to profit from his short position – he’s announced he’s giving all money he earns from it to charity – but that he would like the federal government to shut Herbalife’s 32-year-old nutritional supplement business down. 'A lot of people have been harmed here,' he said in an interview with Bloomberg last week. Needless to say, Herbalife is crying foul, and Herbalife Chief Executive Officer Michael Johnson says he will respond to what he describes as 'blatant market manipulation' by Ackman in an day to be held in early January, 2013."
This follows an May 1, 2012 episode where David Einhorn, a prominent hedge fund manager for Greenlight Capital, raised similar questions in a conference call with Herbalife investors.
For further commentary on Herbalife, see "Deja Vu's" Dec. 23 article on SeekingAlpha.com: "But Mr. Ackman, Herbalife is a Sustainable Pyramid Scheme", which points out:
"[Herbalife's] 'innovation' of blaming the victim for not getting paid back allows Herbalife to import a steady supply of new victims each year, suck them dry and discard them. Much like a ravenous herd that grazes a range down to the bare ground and moves on to the next grassland, Herbalife sustains itself by moving from one demographic group to the next - African Americans, Koreans, Chinese, stay at home moms, college students, etc. Herbalife sucks each group dry over a period of years and then moves on to the next. This explains how Herbalife has stayed in business for 32 years in the US. Internationally, it's much simpler, Herbalife simply moves on from one set of countries to the next."
(Deja Vu, an anonymous author for Seeking Alpha who claims to be a CEO of a medical device company, also discloses a short position in Herbalife, FWIW.)
This post was deleted for the following reason: Poster's Request -- Brandon Blatcher
Pershing Square currently maintains a substantial short position in the common stock of Herbalife Ltd. (“Herbalife”). This position does not include any options or puts.
Pershing Square will profit if the trading price declines for common shares of Herbalife and will lose money if the trading price increases for common shares of Herbalife.
That's clever.
posted by dunkadunc at 6:26 AM on December 25, 2012
Pershing Square will profit if the trading price declines for common shares of Herbalife and will lose money if the trading price increases for common shares of Herbalife.
That's clever.
posted by dunkadunc at 6:26 AM on December 25, 2012
Yeah I was roped into Amway a couple decades ago and even then the culture was very, very heavily biased towards "if you have the right attitude then you can be a millionaire (and here is a catalog full of $20 motivational tapes, including a monthly subscription option to help you get that attitude)" so that when you wash out you don't ask questions about their fucked up business model but instead just sigh and know it happened because you didn't have what it takes.
It's hearsay but my understanding is that the motivational speaking and lecture businesses that orbit around the MLM schemes are vastly more profitable than the products sold by the schemes. After all, there's only so much soap you can buy, but there's always another tape to listen to, or lecture or conference or rally you simply must attend!
posted by seanmpuckett at 6:28 AM on December 25, 2012 [6 favorites]
It's hearsay but my understanding is that the motivational speaking and lecture businesses that orbit around the MLM schemes are vastly more profitable than the products sold by the schemes. After all, there's only so much soap you can buy, but there's always another tape to listen to, or lecture or conference or rally you simply must attend!
posted by seanmpuckett at 6:28 AM on December 25, 2012 [6 favorites]
Heh, this is fantastic: Herbalife just announced a new factory with 500+ jobs in my city.
posted by sonic meat machine at 6:31 AM on December 25, 2012
posted by sonic meat machine at 6:31 AM on December 25, 2012
Rob Cockerham of cockeyed.com did some great civilian investigative reporting on Herbalife a while ago, it's a good read with tons of interesting feedback.
posted by jpeacock at 6:34 AM on December 25, 2012 [6 favorites]
posted by jpeacock at 6:34 AM on December 25, 2012 [6 favorites]
I also saw and enjoyed reading this piece which is the counter-argument as to why Ackerman is wrong.
posted by procrastination at 6:41 AM on December 25, 2012
posted by procrastination at 6:41 AM on December 25, 2012
They should shield themselves from all this by becoming a religion. Then, if you complain about what they're doing, they can call you a bigot for mocking their deeply held beliefs.
posted by dunkadunc at 6:42 AM on December 25, 2012 [16 favorites]
posted by dunkadunc at 6:42 AM on December 25, 2012 [16 favorites]
The presentation is damning morally, but I guess I'm not sure why the business model isn't sustainable. The fact that 93 percent of distributors are making 0 dollars, and have made that much for decades makes me feel like there are a near inexhaustible supply of fools to part money from. Unless the FTC shuts it down, I don't see it going anywhere.
I don't know how the CEO sleeps at night, though.
posted by empath at 6:58 AM on December 25, 2012 [1 favorite]
I don't know how the CEO sleeps at night, though.
posted by empath at 6:58 AM on December 25, 2012 [1 favorite]
january 2013: parasite vs. parasite... to the death!
posted by ennui.bz at 7:00 AM on December 25, 2012 [4 favorites]
posted by ennui.bz at 7:00 AM on December 25, 2012 [4 favorites]
In my experience, most sales jobs are marketed as "if you have the right attitude then you can be a millionaire" too.
Also, please explain why Bill Ackman is a parasite.
posted by Daddy-O at 7:08 AM on December 25, 2012 [2 favorites]
Also, please explain why Bill Ackman is a parasite.
posted by Daddy-O at 7:08 AM on December 25, 2012 [2 favorites]
Oh yeah, spitball, it is totally fair to point that out. I don't know who is right, I just like seeing the counterarguments to overwhelming presentations. I will be watching to see what happens with interest, but with no money on the line.
posted by procrastination at 7:12 AM on December 25, 2012
posted by procrastination at 7:12 AM on December 25, 2012
I'll explain why Ackman is a parasite. He's a hedge fund guy that makes $100s of millions "restructuring companies" often at the expense of jobs, the company's long term health, etc...
posted by ill3 at 7:20 AM on December 25, 2012 [5 favorites]
posted by ill3 at 7:20 AM on December 25, 2012 [5 favorites]
Amway vs. Herbalife as pyramid scheme or legit MLM enterprise - there is actually a framework established by the FTC for differentiating the two. Its a function of how much is made from the sale of products and how much is made from kicking up revenue from other recruited salespeople.
Ackman's claim is that Herbalife uses some questionable accounting practice to inflate the amount of revenue from third party sales to get away from the FTC cracking down on them. Of course the fact it took him 350 pages of PPT is pure Ackman.
This is also sort of his schtick, especially his appeal to the government.
The Charity donation is not as altruistic as it sounds unless he donates his investment management services to his fund. TCI does the same thing, but then they still charge the charity 2 and 20.
posted by JPD at 7:25 AM on December 25, 2012
Ackman's claim is that Herbalife uses some questionable accounting practice to inflate the amount of revenue from third party sales to get away from the FTC cracking down on them. Of course the fact it took him 350 pages of PPT is pure Ackman.
This is also sort of his schtick, especially his appeal to the government.
The Charity donation is not as altruistic as it sounds unless he donates his investment management services to his fund. TCI does the same thing, but then they still charge the charity 2 and 20.
posted by JPD at 7:25 AM on December 25, 2012
Based on my eavesdropping experiences, these kinds of businesses are probably responsible for about 25% of the sales in suburban coffee shops.
posted by srboisvert at 7:26 AM on December 25, 2012 [4 favorites]
posted by srboisvert at 7:26 AM on December 25, 2012 [4 favorites]
I'll explain why Ackman is a parasite. He's a hedge fund guy that makes $100s of millions "restructuring companies" often at the expense of jobs, the company's long term health, etc...
That's not really his schtick. He's actually most well known for his short investments and some distressed investments he made. Well and his one notoriously failed Target activist approach where he basically got rebuffed by shareholders.
Activism only works when the target is truly fucked up to the point that the shareholders will fire the board - this is really rare.
posted by JPD at 7:29 AM on December 25, 2012
That's not really his schtick. He's actually most well known for his short investments and some distressed investments he made. Well and his one notoriously failed Target activist approach where he basically got rebuffed by shareholders.
Activism only works when the target is truly fucked up to the point that the shareholders will fire the board - this is really rare.
posted by JPD at 7:29 AM on December 25, 2012
The slightest bit of googling on my part would have shown me that Ackman is a hedge fund guy and not a mutual fund CEO or manager as I assumed. My thanks and apologies.
posted by Daddy-O at 7:40 AM on December 25, 2012
posted by Daddy-O at 7:40 AM on December 25, 2012
The only difference between a hedge fund guy and a mutual fund guy is a compensation scheme.
posted by JPD at 7:43 AM on December 25, 2012 [3 favorites]
posted by JPD at 7:43 AM on December 25, 2012 [3 favorites]
He doesn't need the FTC to step in for his short position to make sense. His later slides about the number of new markets that Herbalife has entered hint that they are running out of suckers. Since the top 7% are making all the revenue, and the top .1% are making all the profit, they need a regular intake of new unburned suckers to keep the scheme rolling. Hence their constant expansion into new territory (see pop and drop slides). Obviously you aren't going to be able to get much new volume when you start trying to expand into countries where the per capita GDP is so low no one can afford to sign up.
posted by BrotherCaine at 8:25 AM on December 25, 2012
posted by BrotherCaine at 8:25 AM on December 25, 2012
The FTC thing only matters to make the timing work out better, I agree. Fundamentally all public MLM businesses go away, it just a matter of how long it takes. Like you said, eventually you run out of marks - even for the legit ones. But that always takes longer than you think it will.
That's also why he went public . Its one of the reasons why shortselling is really hard even if you have nearly permanent capital.
You could be short herbalife but since the short thesis is predicated on thinking mgmt is shady and likely to manufacture good news whenever they can, you could sit around being short, but right while the stock doubles or triples on you - which if you run a concentrated book can be really problematic. You might be OK with having 10% of your portfolio short HLF because you think its a fraud, but at 30% you might decided better to take a loss to reduce your exposure. There is some maximum position size where even a very small risk of being wrong is too big a risk.
The Ackman/Einhorn approach is sort of a solution to that issue. Go public with what you think, and once you have rep for being right it becomes self-perpetuating. Buffett does basically the same sort of thing on the long side these days. Some old school HF guys hate the public short presentation thing. Think its in bad taste. Certainly it puts things out in the public sphere that used to be kept much closer to the vest.
posted by JPD at 8:37 AM on December 25, 2012 [6 favorites]
That's also why he went public . Its one of the reasons why shortselling is really hard even if you have nearly permanent capital.
You could be short herbalife but since the short thesis is predicated on thinking mgmt is shady and likely to manufacture good news whenever they can, you could sit around being short, but right while the stock doubles or triples on you - which if you run a concentrated book can be really problematic. You might be OK with having 10% of your portfolio short HLF because you think its a fraud, but at 30% you might decided better to take a loss to reduce your exposure. There is some maximum position size where even a very small risk of being wrong is too big a risk.
The Ackman/Einhorn approach is sort of a solution to that issue. Go public with what you think, and once you have rep for being right it becomes self-perpetuating. Buffett does basically the same sort of thing on the long side these days. Some old school HF guys hate the public short presentation thing. Think its in bad taste. Certainly it puts things out in the public sphere that used to be kept much closer to the vest.
posted by JPD at 8:37 AM on December 25, 2012 [6 favorites]
BTW - here is another supposed MLM fraud.
posted by JPD at 8:41 AM on December 25, 2012 [2 favorites]
posted by JPD at 8:41 AM on December 25, 2012 [2 favorites]
Lose beta now, ask me how!
posted by chavenet at 8:42 AM on December 25, 2012 [3 favorites]
posted by chavenet at 8:42 AM on December 25, 2012 [3 favorites]
I wonder how many distributors also own stock in herbalife?
posted by empath at 8:48 AM on December 25, 2012
posted by empath at 8:48 AM on December 25, 2012
Wow! Who needs government regulations when you have saintly folks like Bill Ackman policing the marketplace! Soon, the Market Almighty will have sifted out the good companies from the bad and the public interest will be served. Praise be to the Market.
posted by indubitable at 8:58 AM on December 25, 2012
posted by indubitable at 8:58 AM on December 25, 2012
My opinion: Herbalife are despicable bottom-feeders, but Ackman's motives aren't all that altruistic either. While he may not earn any money from this, he's also making sure that he doesn't lose any either, and one can lose an awful lot of money shorting stocks.
posted by Skeptic at 9:09 AM on December 25, 2012
posted by Skeptic at 9:09 AM on December 25, 2012
That cockeyed.com article jpeacock linked is pretty good and really illustrates how far Herbalife goes to keep the nuts and bolts of their operation secret. It makes the really good point that if every distributor even signed up two distributors per month, a goal which the promotional literature implies is reasonable, then the company would have burned through the world's population in just a couple of years.
posted by localroger at 9:22 AM on December 25, 2012
posted by localroger at 9:22 AM on December 25, 2012
Sadly, the target demographic for Herbalife where I live likely can't read any of this because it's not in Spanish.
posted by carsonb at 9:26 AM on December 25, 2012
posted by carsonb at 9:26 AM on December 25, 2012
Hey. I have a soccer jersey with the Herbalife logo. If I have to get another soccery to be up to date with corporate sponsors I am going to be very upset.
posted by xmutex at 9:33 AM on December 25, 2012 [1 favorite]
posted by xmutex at 9:33 AM on December 25, 2012 [1 favorite]
I wonder how many distributors also own stock in herbalife?
Actually, I'm going to elaborate on this -- A) would they have been better off buying stock in herbalife they wanted to make money? and B) if herbalife is lying through their teeth to their distributors, why would they be honest with their investors?
posted by empath at 9:44 AM on December 25, 2012
Actually, I'm going to elaborate on this -- A) would they have been better off buying stock in herbalife they wanted to make money? and B) if herbalife is lying through their teeth to their distributors, why would they be honest with their investors?
posted by empath at 9:44 AM on December 25, 2012
I'm not responding to your particular comment, spitbull, just my usual oblique way of approaching my point. Which I suppose is, the real story here is not that the Randian superman capitalist is stepping in with the forces of The Market to correct evil deeds, but that our government has failed to prevent something like Herbalife from existing in the first place. So in this vacuum, we are left to be... thankful? that some unimaginably wealthy dude figured out that he could make a ton of money through generating outrage and cajoling the government into acting.
And I don't believe for a minute that he won't directly profit from his position moving in his favor. This is a man who made a fortune as ahigh class grifter hedge fund manager. He'll find a loophole wherein what he said was technically true, but misleading (JPD has already mentioned one possibility).
posted by indubitable at 9:56 AM on December 25, 2012 [1 favorite]
And I don't believe for a minute that he won't directly profit from his position moving in his favor. This is a man who made a fortune as a
posted by indubitable at 9:56 AM on December 25, 2012 [1 favorite]
The scary truth behind Herbalife is that politicians are willing to add more regulation to our lives, yet are clearly unable to enforce the regulations we have. This will not end well.
By any measure, from what I'm reading, Herbalife should have been shut down as a pyramid scheme long ago. Even now, lawyers should be recruiting former sellers of Herbalife products to form a class-action suit.
BTW, I found this story through a blogger who specializes in forensic accounting. Over a couple of posts, she lays out the basic argument and defenses in the case. Here are a couple of examples: Bill Ackman on his Herbalife Short, Herbalife does not track retail sales (this is in violation of a consent decree with the courts), and If Herbalife was a Pyramid Scheme It Would Have Collapsed By Now.
posted by Bill Peschel at 10:18 AM on December 25, 2012 [3 favorites]
By any measure, from what I'm reading, Herbalife should have been shut down as a pyramid scheme long ago. Even now, lawyers should be recruiting former sellers of Herbalife products to form a class-action suit.
BTW, I found this story through a blogger who specializes in forensic accounting. Over a couple of posts, she lays out the basic argument and defenses in the case. Here are a couple of examples: Bill Ackman on his Herbalife Short, Herbalife does not track retail sales (this is in violation of a consent decree with the courts), and If Herbalife was a Pyramid Scheme It Would Have Collapsed By Now.
posted by Bill Peschel at 10:18 AM on December 25, 2012 [3 favorites]
I got in an email row over this company a few years ago when an infected cousin tried to start recruiting in the family. I'd like to send this thread to that list but I fear it would be seen as unChristmasy.
posted by gerryblog at 10:26 AM on December 25, 2012 [1 favorite]
posted by gerryblog at 10:26 AM on December 25, 2012 [1 favorite]
My concern is for the sari sari shop owner in a tiny village in the Philippines who invested her meagre savings to set up a Herbalife shop at the market. Her master's degree holding daughter, who works in Singapore as a domestic, was so proud of her mother's increase in income.
[insert rude words here]
posted by infini at 10:26 AM on December 25, 2012 [2 favorites]
[insert rude words here]
posted by infini at 10:26 AM on December 25, 2012 [2 favorites]
Just out of curiosity, is there any market where Herbalife is popular enough to potentially cause an Albania '97 kind of scenario or is that only possible with a ponzi / pure pyramid scheme?
posted by BrotherCaine at 10:49 AM on December 25, 2012
posted by BrotherCaine at 10:49 AM on December 25, 2012
Just out of curiosity, is there any market where Herbalife is popular enough to potentially cause an Albania '97 kind of scenario or is that only possible with a ponzi / pure pyramid scheme?
Well, as all these links show, Herbalife is a pure pyramid scheme. It's difficult to know how big it is in each market, though, because they are so stealthy.
I wonder whether one thing that could lead to their downfall (and probably one of the reasons for their stealth) would be tax compliance and in particular sales taxes. I really wonder how they manage to comply with Value-Added Tax rules in Europe, because VAT is charged on the end sale.
posted by Skeptic at 11:37 AM on December 25, 2012
Well, as all these links show, Herbalife is a pure pyramid scheme. It's difficult to know how big it is in each market, though, because they are so stealthy.
I wonder whether one thing that could lead to their downfall (and probably one of the reasons for their stealth) would be tax compliance and in particular sales taxes. I really wonder how they manage to comply with Value-Added Tax rules in Europe, because VAT is charged on the end sale.
posted by Skeptic at 11:37 AM on December 25, 2012
hahahaha fuck you LA Galaxy.
posted by 7segment at 11:48 AM on December 25, 2012 [2 favorites]
posted by 7segment at 11:48 AM on December 25, 2012 [2 favorites]
I think they charge VAT on the full MSRP to the people buying "inventory"
posted by JPD at 11:48 AM on December 25, 2012 [1 favorite]
posted by JPD at 11:48 AM on December 25, 2012 [1 favorite]
the top 7% are making all the revenue, and the top .1% are making all the profit
Sounds like Capitalism in its purest and most successful form to me.
posted by oneswellfoop at 11:52 AM on December 25, 2012
Sounds like Capitalism in its purest and most successful form to me.
posted by oneswellfoop at 11:52 AM on December 25, 2012
JPD: "BTW - here is another supposed MLM fraud."
A whole bunch of people I went to high school with have gotten into Body by Vi - I see them post about it on Facebook ALL THE TIME.
Also, all sorts of those "Start your own business from home" ads on the radio are for Herbalife.
posted by SisterHavana at 12:12 PM on December 25, 2012 [1 favorite]
A whole bunch of people I went to high school with have gotten into Body by Vi - I see them post about it on Facebook ALL THE TIME.
Also, all sorts of those "Start your own business from home" ads on the radio are for Herbalife.
posted by SisterHavana at 12:12 PM on December 25, 2012 [1 favorite]
I think they charge VAT on the full MSRP to the people buying "inventory"
I don't think so: according to this 2004 Belgian court ruling (which already deemed Herbalife to be a pyramid scheme), Herbalife's distributor agreement explicitly requires its "distributors" to get a VAT number and act as "independent entrepreneurs". "Inventory" sales to them must thus be VAT-free. If the "distributors" end up consuming most of the stuff themselves, or throwing it away, I think this would qualify in the eyes of most European tax authorities as a massive VAT fraud.
posted by Skeptic at 12:21 PM on December 25, 2012 [2 favorites]
I don't think so: according to this 2004 Belgian court ruling (which already deemed Herbalife to be a pyramid scheme), Herbalife's distributor agreement explicitly requires its "distributors" to get a VAT number and act as "independent entrepreneurs". "Inventory" sales to them must thus be VAT-free. If the "distributors" end up consuming most of the stuff themselves, or throwing it away, I think this would qualify in the eyes of most European tax authorities as a massive VAT fraud.
posted by Skeptic at 12:21 PM on December 25, 2012 [2 favorites]
Aaand...indeed, this SEC filing from Herbalife indicates that it has had some run-ins with tax authorities in several countries (see point 5, "Contingencies"), mainly on VAT-related issues, but they claim to have been able to fend them off in court so far. They must have really good lawyers.
posted by Skeptic at 12:37 PM on December 25, 2012 [1 favorite]
posted by Skeptic at 12:37 PM on December 25, 2012 [1 favorite]
Sounds like Capitalism in its purest and most successful form to me.
Except that the participants are actually providing capital and only getting returns if they are early adopters, not sure if there's a term for that as an economic system.
posted by BrotherCaine at 12:42 PM on December 25, 2012 [1 favorite]
Except that the participants are actually providing capital and only getting returns if they are early adopters, not sure if there's a term for that as an economic system.
posted by BrotherCaine at 12:42 PM on December 25, 2012 [1 favorite]
And despite the law being sort of there to prevent this stuff, it's also sort of not there, and it isn't really enforced, and if you lie well you can circumvent it.
LIke HSBC and the LIBOR fraud?
posted by rough ashlar at 12:58 PM on December 25, 2012 [1 favorite]
LIke HSBC and the LIBOR fraud?
posted by rough ashlar at 12:58 PM on December 25, 2012 [1 favorite]
I'll explain why Ackman is a parasite. He's a hedge fund guy that makes $100s of millions "restructuring companies" often at the expense of jobs, the company's long term health, etc...
Not really.
Bill Ackman is also famous for having published Is MBIA Triple A? which was highly critical of MBIA's business model because of their exposure to downside risk in mortgage backed securities and related structured products.
In 2002.
As a result, he got investigated by the SEC, the NY AG, widely derided as an irresponsible market manipulator, as someone who didn't understand the complicated business of structured finance.
posted by atrazine at 1:00 PM on December 25, 2012 [7 favorites]
Not really.
Bill Ackman is also famous for having published Is MBIA Triple A? which was highly critical of MBIA's business model because of their exposure to downside risk in mortgage backed securities and related structured products.
In 2002.
As a result, he got investigated by the SEC, the NY AG, widely derided as an irresponsible market manipulator, as someone who didn't understand the complicated business of structured finance.
posted by atrazine at 1:00 PM on December 25, 2012 [7 favorites]
For all those saying I've got Ackman wrong....Look at JC Penney. The business has been largely destroyed (there was another Metafilter post on this not too long ago). Many jobs lost, tons of sales lost and Ackman's lost money too. There are many ways for him to still win if the company fails. Take it private, liquidate the real estate assets, etc... Bad for the company, bad for potentially even the current investors. In mind it's very similar to what many were complaining about Bain/Romney doing. Profiting on a failing enterprise at the expense of the enterprise....
posted by ill3 at 1:45 PM on December 25, 2012
posted by ill3 at 1:45 PM on December 25, 2012
Fortune magazine had a big article on MLMs back in late October, which I just discovered. Points out how many of these companies headquarter in Utah (where Sen. Hatch and the LDS Church have both defended the broad freedom of nutritional supplement companies to lie with impunity)
Did I miss the part of the article where it talks about the LDS Church itself defending MLMs, or is that somewhere else?
posted by weston at 2:16 PM on December 25, 2012
Did I miss the part of the article where it talks about the LDS Church itself defending MLMs, or is that somewhere else?
posted by weston at 2:16 PM on December 25, 2012
Yeah, the church as a subculture is definitely one in which MLMs seem to spawn and thrive for a lot of reasons: a Mormon strain of the prosperity gospel, social networks that are dense with loose ties, and maybe sales/presentation skills that service in the church tends to foster. Throw in a natureopathic streak in the health code, and mix in a special obsession with perfection within the culture-wide obsession with youth and beauty and success, and you get the MLM beauty-product and supplement industry.
The thing I haven't seen yet, though, is much in the way that directly connects above-regional leadership with the industry. It would be interesting to see if there was some kind of board-service or former employment connection for anybody on this page or maybe this one.
(Not that former employment is necessarily a strong connection. I ended up working for NuSkin corporate for a year a while back; came in through Big Planet, an MLM ISP which they bought, where I'd been hired to help build out an intranet tech support staff could use for reference. Two weeks after I came on, my boss was maneuvered out, my job was absorbed into a NuSkin-wide intranet team, apparently entirely for the purpose of kingdom-building, since I was asked to do nearly nothing afterwards and occasionally pushed back on when I tried to do something useful. I don't really have any complaints about how I was treated otherwise, but it was the most Dilbert-esque and opaque place I've worked, and of course even the arguably useful internet services were not competitively priced... because that's not really what they were selling.)
There's actually some evidence that at least some Mormon leadership is uncomfortable with these organizations and others that seem to grow up in similar ways (foofy life-coaching/block-removing stuff). Periodically you see church-wide communications go out to local congregations telling people *not* to use church rosters, church callings, church property etc for business or any non-church activity, and to be careful of people using church connections to sell products and services. It's pretty hard for me to imagine they're talking about anything else other than MLMs.
Of course, it clearly is not hard for a lot of Mormons to imagine exactly that. :/
As Jesus said, by their natural health-promoting fruit extracts ye shall know them, I guess.
posted by weston at 3:57 PM on December 25, 2012 [1 favorite]
The thing I haven't seen yet, though, is much in the way that directly connects above-regional leadership with the industry. It would be interesting to see if there was some kind of board-service or former employment connection for anybody on this page or maybe this one.
(Not that former employment is necessarily a strong connection. I ended up working for NuSkin corporate for a year a while back; came in through Big Planet, an MLM ISP which they bought, where I'd been hired to help build out an intranet tech support staff could use for reference. Two weeks after I came on, my boss was maneuvered out, my job was absorbed into a NuSkin-wide intranet team, apparently entirely for the purpose of kingdom-building, since I was asked to do nearly nothing afterwards and occasionally pushed back on when I tried to do something useful. I don't really have any complaints about how I was treated otherwise, but it was the most Dilbert-esque and opaque place I've worked, and of course even the arguably useful internet services were not competitively priced... because that's not really what they were selling.)
There's actually some evidence that at least some Mormon leadership is uncomfortable with these organizations and others that seem to grow up in similar ways (foofy life-coaching/block-removing stuff). Periodically you see church-wide communications go out to local congregations telling people *not* to use church rosters, church callings, church property etc for business or any non-church activity, and to be careful of people using church connections to sell products and services. It's pretty hard for me to imagine they're talking about anything else other than MLMs.
Of course, it clearly is not hard for a lot of Mormons to imagine exactly that. :/
As Jesus said, by their natural health-promoting fruit extracts ye shall know them, I guess.
posted by weston at 3:57 PM on December 25, 2012 [1 favorite]
Bill Ackman is also famous for having published Is MBIA Triple A? which was highly critical of MBIA's business model because of their exposure to downside risk in mortgage backed securities and related structured products.
Read what Ackman wrote in 2002 - he was completely and totally wrong.
posted by JPD at 5:05 PM on December 25, 2012 [1 favorite]
Read what Ackman wrote in 2002 - he was completely and totally wrong.
posted by JPD at 5:05 PM on December 25, 2012 [1 favorite]
What I find truly unreal is anyone claiming that there's a need for MLM for specialty products in the same world that has Etsy and Amazon.
Maybe before the Internet there could be a legitimate niche for the likes of Mary Kay, but not today.
posted by ocschwar at 5:20 PM on December 25, 2012
Maybe before the Internet there could be a legitimate niche for the likes of Mary Kay, but not today.
posted by ocschwar at 5:20 PM on December 25, 2012
So here's an interesting tidbit - there appears to be a (I'd presume) fake Julian Robertson twitter that is promoting a pro -HLF viewpoint.
posted by JPD at 5:25 PM on December 25, 2012
posted by JPD at 5:25 PM on December 25, 2012
However, the guys (and it's all guys) who run those industries, their lobbyists, their in-the-pocket politicians, and a huge number of people who work in those industries are members of the LDS church, and in many cases in leadership positions within their church (ie, Orrin Hatch is a bishop, and as we all know Romney was too)
"Bishop" in LDS circles is a lay office that's more or less like the part-time pastor of a local congregation. The title confers some caché of respectability, and a bishop can be very influential in the thinking and choices of people in their congregation, but it's a very localized influence. I don't think most Mormons would think of Romney or Hatch as part of the leadership of the church.
Not to say that Romney and Hatch aren't influential among Mormons, but that's pretty much from the status conferred by their successes plus the identification factor (like a lot of the influential types you generally see mentioned in these articles).
But if your larger point is to ask why this industry incubates so well among Mormons and seems to be predominately Mormon-led -- well, I certainly agree that's a question that more Mormons and perhaps the actual leadership off the church should come to grips with.
Then of course there is Frank Van der Sloot, billionaire CEO of Melaleuca, an Idaho-based nutritional supplement MLM that has had some serious problems with the law
Melaleuca. I don't know how, but I managed to avoid knowing anything about them for a long time. I still don't know much about them beyond Mr. VanderSloot's publicized activities, but my introduction to that company was through a new boss brought on from Melaleuca to a design company I was working for. Least favorite boss ever. Definitely more than a whiff about the man of a willingness to take advantage of others and bend the truth for his own advancement.
posted by weston at 6:45 PM on December 25, 2012 [1 favorite]
"Bishop" in LDS circles is a lay office that's more or less like the part-time pastor of a local congregation. The title confers some caché of respectability, and a bishop can be very influential in the thinking and choices of people in their congregation, but it's a very localized influence. I don't think most Mormons would think of Romney or Hatch as part of the leadership of the church.
Not to say that Romney and Hatch aren't influential among Mormons, but that's pretty much from the status conferred by their successes plus the identification factor (like a lot of the influential types you generally see mentioned in these articles).
But if your larger point is to ask why this industry incubates so well among Mormons and seems to be predominately Mormon-led -- well, I certainly agree that's a question that more Mormons and perhaps the actual leadership off the church should come to grips with.
Then of course there is Frank Van der Sloot, billionaire CEO of Melaleuca, an Idaho-based nutritional supplement MLM that has had some serious problems with the law
Melaleuca. I don't know how, but I managed to avoid knowing anything about them for a long time. I still don't know much about them beyond Mr. VanderSloot's publicized activities, but my introduction to that company was through a new boss brought on from Melaleuca to a design company I was working for. Least favorite boss ever. Definitely more than a whiff about the man of a willingness to take advantage of others and bend the truth for his own advancement.
posted by weston at 6:45 PM on December 25, 2012 [1 favorite]
Maybe before the Internet there could be a legitimate niche for the likes of Mary Kay, but not today.
Because it's easy to test that makeup matches your skin tone over the Internet?
posted by BrotherCaine at 9:56 PM on December 25, 2012
Because it's easy to test that makeup matches your skin tone over the Internet?
posted by BrotherCaine at 9:56 PM on December 25, 2012
I just read through the entire powerpoint PDF. Whew... nothing really stood out as an "ah ha!" moment, but it builds its case page by page.
posted by letitrain at 10:06 PM on December 25, 2012
posted by letitrain at 10:06 PM on December 25, 2012
For me the AHA moment was the part where you aren't allowed into the top tiers on sales alone, you have to recruit. Meanwhile, only one tier below that level makes any revenue, and the revenue that is made is below the average yearly cost for active sellers. Which pretty much is close to saying it's impossible to make money any way other than recruitment, hence pyramid.
posted by BrotherCaine at 12:09 AM on December 26, 2012 [2 favorites]
posted by BrotherCaine at 12:09 AM on December 26, 2012 [2 favorites]
Herbalife is such shit. I was staggered go hear them mentioned on CNBC lately... "these fucking clowns haven't been shut down?" They are largely responsible for littering much of the Denver area with tons of "work from home" scammy signs years ago.
posted by lordaych at 3:57 PM on December 26, 2012
posted by lordaych at 3:57 PM on December 26, 2012
One Indian distributor who shelled out money for Herbalife and lost his friends said, way back in 2005, “I think they might be dumping these in India now, since people in their country didn't let them get away with it (emphasis is ours). I realised that the truth about this business is that the money is made not by the distributors but by the company, when they coerce you into buying their starter kits and badges and assorted rubbish. When something stinks so bad you've got to get out and close the door. I'm lucky I did that, before I compromised on my ethical standards and lost all my friends to boot.”
This is what happens when an MLM, booted from one country, targets another with spotty regulation. India happens to be one such country.
posted by infini at 3:31 AM on December 27, 2012
This is what happens when an MLM, booted from one country, targets another with spotty regulation. India happens to be one such country.
posted by infini at 3:31 AM on December 27, 2012
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