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.
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