RS 2: A Billion Dollar Bet Against Weight-Loss Shakes

As NPR so graciously explains, “Herbalife, a company that sells weight loss shakes, vitamins and other similar products, is worth billions of dollars. The company has been around for more than 30 years, and it's traded on the New York Stock Exchange.” This story interested me for multiple meanings, which I will explain. One, it mentions the paradigm of multilevel marketing companies, and two, it suggests the idea of an investing prophecy.

David Inehorn, a man who called into a public Herbalife company conference call, is a man who strikes fear into the heart of a CEO. He is a short seller who bets against companies and bets they will fail. He asks how much of their final sales are sold outside their network? Sounds stupid, but for people in the know, the meaning made sense. He was really just asking if the company was a fraud! After this conversation, their stock dropped 20%. Bill Ackman is a hedge fund owner that has exposed a billion worth of Herbalife stock and tried to prove the company is fraudulent. That’s what he does, short sells stocks to whistleblow on pyramid scheming companies. But here’s the trick. To me, this financial short selling idea is a prophecy. If Ackman or Inehorn can convince enough people or create trepidation among stockholders about Herbalife, he will profit because people will pull their investments from the company. His hedge fund will succeed. Do I think Herbalife is a scheme and Ackman is correct? Partially.

Who is buying Herbalife products? If it is mostly people who are buying products just to get in on the action and become distributors, then it is a pyramid scheme! Pyramid schemes could only continue by recruiting more sellers. A Herbalife distributor interviewed claims that without his new recruits he would still be just fine.

CEO of Herbalife reacted quickly defending his company claiming they are not a pyramid scheme. Ordinary people sell Herbalife products, it is a home based distribution business similar to something like Candle Light or Avon. These types of companies are known as multilevel marketing, a type of brand very close to my heart. My mom has worked for three different home based multilevel marketing companies, Creative Memories Scrapbooks, lia sophia jewelry and as of two weeks ago, she became the first U.S. manager for a Canadian company called Simply You Jewelry during it’s United States launch. My mom’s team makes a whopping 6 figures per year, more than easily, and she values her down-line like no other manager I have seen before. The more recruits my mom gets, the more value her team has, the higher her position becomes, and the more money she makes. However, even though my mom has no need to hold parties anymore because her team is sufficient enough to do so, my mom works hard training her girls and helping them market their company since real people purchase their products.

In the NPR clip, they describe a video online of a distributor talking about his car and trading it in to a Lexus dealer because he could afford one thanks to working for Herbalife. My mom was able to pay for my high school education, since I went to a private Catholic school, after only one year of working with lia sophia. She was able to spend a little more of her money and offer up more money for bills…her company DID make a difference just like the man with the Lexus did. My mom has always believed in the products that she sells, not the scheme or the money making aspect of her companies. However, the distributor’s of Herbalife products don’t seem emotionally invested in their product and therefore I do believe the company is slightly schemey.

Another thing I think is schemey? Ackman. “I’m rich already, I don't need this.” What an asshole. 

RS1: How to Be A Genius

This blog post is about what I thought about the article “How to Be a Genius” by David Dobbs. This article appeared in the September 2006 edition of the New Scientist.

In David Dobbs’ article “How To Be a Genius”, his theory and research claim the idea that a genius is molded, not born. According to his research, to be considered genius, a person must be an “exceptional person in exceptional conditions,” quoting psychologist Benjamin Bloom words. Aside from having an innate ability alone, to be a genius requires being in an environment that infiltrates hard work ethic into a person’s system and requires the guidance of people or mentors who encourage and support. So, maybe the typical genius is not a genius after all, but just your average workaholic, privileged overachiever. 

Everybody knows one. The person in your class who never shows up in sweatpants, whose GPA is more important to them than their social life and friends, and whose resume is a laundry list of activities, all of which they show the utmost loyalty to. This character, or portrait, is that of a classic overachiever. In younger years, often times overachievers are categorized as the “smartest” or “most intelligent” because the work they accomplish in and outside the classroom is done so easily and so profoundly. People whose work ethics mature at a young age often make difficult tasks for an average student, athlete, musician, artist, etc. seem juvenile. For a young overachieving student, finishing a brilliant five-page essay in two hours is a no brainer, because it was the only way they were ever taught how to finish a five-page paper. 

I agree with Dobbs, geniuses definitely aren’t born, but maybe instead they are molded into overachievers in the toddler years. Eric Kandel of Columbia University in New York discovered in his studies that focus and practice literally do “make perfect.” As Dobbs explains “focused study and practice literally build the neural networks of expertise. Genetics may allow one person to build synapses faster than another, but either way the lesson must still be learned. Genius must be built.”  Overachievers strive for perfection, and when they fall short, they try harder. 

Baby Genius, a company “committed to providing music-based products that are entertaining, educational and beneficial to the well-being of babies and young children” is an example of the nurturing of children’s brains at unbelievably young ages.  The company believes that their programs and DVDs tap into and nourish the innate ability of a child from an early age, giving them a head start advantage in social skills, academics, and the arts. Geniuses are built early on by instilling the workings of an overachiever into their brain. Any athlete would agree, the longer you practice, the better you become. Would Tiger Woods have been as great of a golfer if he had not been learning the technique and expertise of the game since the age of 3? If a student is taught early on how to begin and end a five-page paper proficiently in elementary school, come middle school their knowledge of writing a paper should be near perfected from learning the technique early on. Thus, Baby Genius’ theories apply. 

The quote “if it were easy, everybody would do it” continuously pops into my mind when I think of the word genius. If being a genius were a simple task, and all you needed was some brainpower and hard work, why wouldn’t our world be filled with prodigies? The number of people who are geniuses in our world must be limited because not every person is given the same opportunities as the next. Anders Ericsson, professor of psychology at Florida State University, was quoted in the article relaying this idea in a slightly shocking but candid manner. He says that geniuses “don't necessarily have an especially high IQ, but they almost always have very supportive environments, and they almost always have important mentors. And the one thing they always have is this incredible investment of effort." Without being given these elements, I truthfully believe geniuses couldn’t exist.

I’m sure that antagonists to this theory will argue that people from slum cities and horrible upbringings have utilized their “natural buoyancy,” or ability to always stay on top, to reach genius levels. From my education and common sense, I would respond to those adversaries very simply. The further down you are pushed, the higher up you want to be. A genius can be born into a privileged life and work hard to gain their success, or a person can be born into a not so privileged life and search for mentors and environments throughout their life to aid their innate abilities to gain their success and move up on the ladder. People come from different walks of life, and people with an incredible ability to become genius will push their way to the top to find resources to make that option a reality. This idea communicates to the masses that anybody with a brain and determination can reach their highest goals and very possibly become genius in their field or trade. From a marketer’s perspective, this presents that there are different ways to advertise to the younger generations how a genius gets to be a genius since a genius is no longer “born” but instead “bred.” Genius!

In all honesty, why would a person WANT to be a genius? Personally, I wouldn't want all the pressure and expectations people would put on me...nor would I want the bullying! The genius of the class is always coined the nerdy kid or teacher's pet, and nobody wants to deal with that! But, nerds do get the chicks and the dough!