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  • Why I'm More Confident Of My Herbalife Short Position Today [View article]
    Product purchased by the warm market of hopeful distributors is retail sales, no one cares why they purchase as long as they do. Requiring 10 customers per distributor in the nutrition club plan is a way to insulate Herbalife from charges of inventory loading and excessive internal consumption. It's deeply clever and profitable. Ethical? Hell no in my opinion, but since when has Wall Street cared at all about that? Unless the FTC does something about the bis opp, this ingenious method of squeezing blood out of the stone will continue indefinitely. Screwing the poor is the American way.
    Jul 22 09:56 PM | 3 Likes Like |Link to Comment
  • The FTC Should Take A Definitive Stance On Pyramid Type Offerings Rather Than A Case-By-Case Approach [View article]
    I agree that's a highly undesirable outcome, but I think it's a realistic one given the FTC's history on this issue. I would very much like to be pleasantly surprised by what the FTC does for a change.
    Jul 21 04:09 PM | 2 Likes Like |Link to Comment
  • The FTC Should Take A Definitive Stance On Pyramid Type Offerings Rather Than A Case-By-Case Approach [View article]
    Yes, Doterra is a MLM similar to Herbalife.
    Jul 21 04:07 PM | 2 Likes Like |Link to Comment
  • The FTC Should Take A Definitive Stance On Pyramid Type Offerings Rather Than A Case-By-Case Approach [View article]
    A very good outline of the current after the fact, case by case problem with MLM regulatory enforcement. I am very curious to see if the Herbalife dust up has any implications for the wider industry. Or indeed, Herbalife, given the basically non existent actions of the FTC for the past 50 years. I don't have much hope on that score frankly. I often wonder what rules could be put in place that would remove the exploitation aspect from MLM, or if that's even possible.

    They could require that you don't have to purchase any amout of product or meet any sales quota to participate in the pay plan for example. But, some MLMs already say they do this (Vemma for example), while the in practice reality is the distributor most likely is paying out of pocket to remain qualified for the business opportunity because they can't make enough outside sales, but it is *theorectically* possible.

    Second to product purchases I would guess the greatest losses incurred by distributors pursing the business opp is the money spent on conferences and sales tools, how could that possibly be regulated? I don't think disclosure laws would even make much of a dent--as long as one person is getting rich from the MLM others will think they can too, no matter the numbers. It's human nature.

    Even if the FTC shuttered Herbalife as a pyramid, that doesn't mean they will do anything about the many others that keep operating in nearly the same way. The closure of FHTM certainly didn't affect a single other MLM operating, I don't see how Herbalife would be any different unless they took steps to regulate the entire industry. We'll see.
    Jul 21 03:20 PM | 5 Likes Like |Link to Comment
  • 'Will You Walk Into My Parlour?' Said The Spider To The Fly [View article]
    This is the first article I've seen that looks in depth at MLM indoctrination. I find it to be the most interesting (and awful) aspect of MLM, and it's something most people have no idea about unless they have experienced it, or seen someone else brainwashed by this crap. It's unbelievable. And shocking. First time I watched a recording of an MLM yearly conference I was both horrified and impressed at their manipulation, and how they get people to manipulate others--especially family and friends as they know that's where most recruits come from. And the rationalization they use. They aren't "selling," oh no, they're "sharing," and you wouldn't want to deprive all your pals of health and wealth now would you?

    What other "business" tells you how to manage your personal life--who you should be associating with, and how you should think--your "mindset"--if you want to be rich while at the exact same time making sure with how the pay plan works, that will never happen? The indoctrination is also the reason I believe so few people complain when they invariably fail--who the hell would believe that the whole song and dance they put on is one long con? If you didn't understand exactly how it worked, you'd think "That couldn't possibly be allowed to happen, they would be shut down, therefore they are telling the truth and I'm just not cut out for this." MLMs in fact use the exact line "if we were a pyramid scheme, we'd be shut down" to counter the pyramid question from potential recruits.

    The most effective MLM brainwashing I've seen makes sure to stress their proven system isn't a "get rich quick" scheme, they say it requires hard work, sacrifice, and 2-5 years to be set for life. The goal is to keep them in as long as possible sending money to the MLM for autoship products, conferences, business tools, and leads, even when they are losing money year after year. And to bring in as many others as they can to the same ends. You don't do that by telling them they can get rich quick because when they don't, they will quit. It's genius.

    MLM brainwashing is so effective in some people they don't realize their behavior is seen as nuts and unethical by normal folks. This dude was fired from his $140,000 a year job in Colorado because he followed a "proven system." He thought it was just okey dokey to try to influence his school district's curricula and to pressure people under him to promote his MLM. The school district, rightly, disagreed.
    Jun 26 03:21 PM | 7 Likes Like |Link to Comment
  • Top 10 Fallacies Regulators Face In Herbalife Case [View article]
    You make an awful lot of assumptions about me, and you know what they say about those. Or not, apparently.

    The sources outside the pay plan MLM compensation that top people get I mentioned previously: you can find explicit examples in the documents of lawsuits between MLMs and their (former) top distributors (particularly Amway), and the lawsuits between MLMs suing other MLMs (who mostly sue each other over top distributor and downline poaching.)

    Do I think the FTC will shut Herbalife down? Based on their previous behavior of basically leaving MLMs unregulated I would have said no. However, since the FTC plus state AGs all opened investigations I am less sure of that. I would say I think it's possible they shut down Herbalife, but still pretty unlikely. More thinking they require a pay plan modification or something of that nature, but really, there's no way to know. Anything short of a complete shut down I don't think will affect Herbalife much at all, if any. It certainly won't affect recruitment, nothing will except shutdown. Always plenty of people who want to buy what they are selling: the American dream--with more Ferraris and fake bake tans.
    May 29 10:39 PM | Likes Like |Link to Comment
  • Top 10 Fallacies Regulators Face In Herbalife Case [View article]
    "Not everyone perhaps has the talent or is willing to make the commitment to succeed. Now that is something Ackman and so many of you always overlook."

    Most excellent example of how someone can look at the evidence provided in the income disclosure and say "well, those other 90% plus of people didn't REALLY want it, or weren't REALLY willing to make the sacrifices necessary." Seems potentially reasonable to think that, because it's often true for other things in life. People are really swayed by the "I got rich and you can too if you just do what I did, it's so easy!" testimonials flogged to death by every MLM--because it works, and the MLMs know it. Except...well, the MLMs tend to leave out some rather pertinent info.

    That big money earner you are admiring the success of? Yeah, they didn't earn their money the way you're going to have to. You can't "do what they did and get what they got" because they have and had many ways to make money in the MLM you never can. Their high position in the pyramid pay plan is something you'll never have due to how hard recruiting people is in the real world and how often they drop out once they are in (constantly because they are losing money.) They are paid to speak at events, they make money (or get a percentage) of all the tools sold to their downline such as books, seminar ticket sales, websites, brochures, and sales leads. Many top people are paid to move from one MLM to another. The MLM is buying their downline in their current company, their success story, and their motivational speaking skills. Normal people joining can't make money from the MLM in any of these ways.

    I'm sorry, I really am. I can totally understand why people believe they can and will work hard enough to be the exception to the dismal numbers on the income disclosure, but you aren't being told the whole truth about how the game really works. It's rigged. Against you. From the start. It has nothing to do with how much you believe in yourself, how hard you're willing to work, or the sacrifices you're willing to make. You're just made to think that so when you fail, you blame yourself and not the rigged game and get pissed and go complain to the FTC.
    May 29 06:58 PM | Likes Like |Link to Comment
  • Top 10 Fallacies Regulators Face In Herbalife Case [View article]
    "Many people have benefitted enormously from Herbalife products and/or business opportunity. "

    No, they believe--directly contradicted by actual evidence (income disclosure)--they will benefit from the business opportunity, not that they have. Because Herbalife told them they will eventually if they follow the "proven system", and how could a company that's been in business for over 30 years be lying? I'd find that pretty convincing.

    MLMs train distributors to answer questions about the company being a pyramid scheme with "No, those are illegal! We wouldn't be allowed to operate if we were one." People have no idea the FTC hasn't been doing its job for decades and why. I couldn't believe it either, so how could I blame them? If I didn't know how to analyze the numbers on the income disclosure, I'd sign up myself.

    The evidence provided by Herbalife itself does not support the idea that "many" people have benefitted from the business opportunity, unless you consider "many" to be 1%. Or I suppose, your definition of "benefitted" to mean something other than making more money in their Herbalife business than they spend to be in in it.

    Don't laugh--I've heard that argument plenty. People don't mind losing money because they are getting out and socializing, right? Or all that personal development they spent money on to help them make money they didn't will help them be better people! Or, they join the bis opp to get the discount, they don't want to make money (most clever one IMO).
    May 28 07:03 PM | 2 Likes Like |Link to Comment
  • Top 10 Fallacies Regulators Face In Herbalife Case [View article]
    This is the rational response. Many MLM people are not rational, it's a business of belief. They are cult-like in this way. MLM people will go to great lengths to defend the business even while they are losing money hand over fist because they are led to believe success is right around the corner (they of course, will never get there.) This is one of the reasons the FTC hadn't done anything about it until now. People in the thick of it believe in it, and when they inevitably fail, they blame themselves. Hence defenders but not many complainers, likely engineered by MLM specifically for this reason. Is genius. Ethical? Hell no in my opinion, but diabolically clever.

    There were websites devoted to defending FHTM as a wonderful, legitimate business who helped many people and was the paragon of virtue. Hundreds of people left comments affirming that belief and saying the FTC was unfairly prosecuting a wonderful business. Such is the power of the MLM propaganda machine, cognitive errors, and the desperate hope of people who really need money.
    May 28 03:14 PM | 3 Likes Like |Link to Comment
  • Top 10 Fallacies Regulators Face In Herbalife Case [View article]
    Good points all. But I'm convinced after a very close reading of the FTC v FHTM marketing the FTC is absolutely not fooled by the smokescreens of legitimacy MLMs use. But shuttering Herbalife isn't just about evidence, as pointed out, it's highly political as well. There are very large implications for the entire MLM industry should the FTC close Herbalife. Telling millions of people who believe this is the way to riches that they are stupid and need the government to protect them will result in a huge outcry and the FTC has to be prepared to take the heat. While I'm convinced they know what they are doing in regards to MLM analysis, I'm not convinced they are willing to stand in front of that blast furnace.
    May 28 12:57 PM | 1 Like Like |Link to Comment
  • Why The Chances Of The Government Shutting Down Herbalife Are Zero [View article]
    Guess I need to restate "If they manage to get a bunch of state AGs together anything could happen" to "If the FBI and DOJ get involved Herbalife is screwed." Must say I never expected that. Every MLM business is now on notice.
    Apr 11 04:24 PM | Likes Like |Link to Comment
  • Why The Chances Of The Government Shutting Down Herbalife Are Zero [View article]
    "Secondly, since there are at least two dozen MLM companies operating in the U.S., all following basically the same sales model. If the government shut down HLF, they'd be forced to investigate the other MLM operators. The FTC is understaffed as it is, and conducting 24 separate company investigations would be an impossible task."

    Fortune Hi-Tech Marketing, shuttered by the FTC in 2013 for being a pyramid scheme after 12 years in business, ran the same way as nearly every other MLM out there--which didn't stop the FTC from their action against them, so why would it with Herbalife? I suppose one could argue Herbalife would be a much greater (richer) opponent than FHTM, so they are certainly dissimilar in that way. Given the FTC's 30 years of inaction on MLMs, I think it unlikely they are going to finally put their foot down in any meaningful way, but it's impossible to say really. If they manage to get a bunch of state AGs together against Herbalife, anything could happen.
    Apr 9 11:41 AM | 8 Likes Like |Link to Comment
  • Why The FTC Has To Shutter Herbalife [View article]
    "If you proactively modify your pay plan like Vemma, you puncture the heart of the goose that lays the golden eggs for your company."

    Vemma has done no such thing. What they have done is slightly modify the terms under which an affiliate may fulfill their personal volume (qualifying volume) by allowing purchases by their customers to count towards qualification to get paid. Many affiliates never get customers or recruits, and if they do, they don't keep them them at a level high enough to pay their requirement for the duration they pursue Vemma's business opportunity, meaning the affiliate will have to purchase product themselves from Vemma in order to continue to be qualified under the pay plan.

    Vemma will not lose a dime in income from this minimal change. Now had they changed the pay plan so affiliates did not have to meet any specific qualifying volume (personal or otherwise), that would have been a noteworthy change. They did not do that.

    BK Boreyko however, has managed to rather skillfully use the media to imply his MLM is better and different than Herbalife and those other, naughty MLMs because now affiliates don't have to make purchases to be in the business opportunity. This is technically true, but leaves off the fact it's only true IF the affiliate can get double the customer volume to make up the difference. The fact that most Vemma affiliates will likely still be paying the autoship themselves has been lost in this conversation.

    If I were Vemma, I'd use the articles saying how Vemma has changed their pay plan (including this one) to be more in line with the FTC as proof of how great Vemma is to potential recruits. BK retweeted the New York Post article, of course he did. I would, it's great press for them.
    Apr 5 07:32 PM | 1 Like Like |Link to Comment
  • The FTC Will End Herbalife As We Know It [View article]
    Vemma's claims of change are interesting in and of itself. I wonder what actually prompted it? They've been going around saying over and over they are like Amazon, and I get why they are making that spin--the association of Vemma with the multi-level marketing business model (which is what they are no matter who they like to claim they are similar to) probably hurts recruitment. But I wouldn't think the whole Herbalife flap would have any effect on recruiting for Vemma as it's not affecting recruiting at Herbalife. I wonder if they hear pushback from potential recruits regarding being shut down by the FTC, I find that hard to believe really. So why change?

    I'm surmising BK is indeed very worried about FTC action--as he should be, and this is an attempt to stave off problems with them. But that also confuses me as the changes are just window dressing and the problematic pay plan continues. BK can't possibly think he can fool the FTC with this PR move can he? Perhaps the idea is it may be enough to keep the FTC from looking at Vemma too closely, showing good faith effort at changes and such. That makes sense, as Vemma has nothing to lose by doing this as they haven't actually changed their pay plan--they know it won't affect sales. They can point to it as a positive that differentiates them from all those other "bad" MLMs (even though it doesn't, recruits won't know that--the New York Post didn't) and it might keep the FTC off them. Or their noise could get the FTC's attention instead. We'll see.
    Apr 4 10:37 AM | 3 Likes Like |Link to Comment
  • The FTC Will End Herbalife As We Know It [View article]
    I based that statement on the FTC's excellent and meticulous analysis of Fortune Hi-Tech Marketing's pay plan in their filings against it as a pyramid scheme, which shows the FTC really understands MLMs and their obsfucating tactics--and sees right through them.

    Prior to that, I wasn't sure the FTC really understood MLM or would ever do anything about them, I was very surprised at their action against FHTM. I am still very skeptical however that they will do anything of material consequence about Herbalife, Vemma, or any of the others given their long history of basically leaving the MLM industry unregulated.
    Apr 4 09:33 AM | 6 Likes Like |Link to Comment