Comment by csours | Hacker News Reader

Comment by csours | Hacker News Reader

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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...

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...

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.

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.

>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.

That's one interpretation. The other interpretation is that herbalife has reached a saturation point where there aren't any suckers to sign up anymore, and all the "customers aren't taking part in the 'pyramid scheme'" are just the bag holders.

I'm guessing all those people buying it at the bottom are doing so to meet monthly minimums. Judging by my experience trying the product, I can't imagine people really want it that bad.

Herbalife's products work, but they're just vitamins, and a protein shake with vitamins. It's nothing special compared to the hundreds of competing products that exist...today.

But when it was founded 4 decades ago...there weren't any products like it on the market. It basically created the market, and it's had 4 decades to expand internationally into countries where there is similarly little to no competition. It's basically the McDonalds of protein shakes.

Herbalife stays in business because most of the "distributors" (in the US) are just end customers who buy in bulk at the "distributor" discount, which is why so many of them don't try to sell it on to others. And that was pretty much what the FTC concluded when they investigated Herbalife. (But note: Herbalife was determined to have operated as a pyramid scheme in several Latin American countries, and was forced to reorganize its operations in those countries.)

>But when it was founded 4 decades ago...there weren't any products like it on the market.

Nonsense.

There have been vitamins and protein drinks sold in stores for over 50 years. Every drug store and most grocery stores carried vitamins since the 1940s. The One-A-Day multivitamin brand appeared in 1943. My parents were born in the 1940s and they took vitamins as children. I was born in the 1960s and I took Flintstones Kids vitamins, which ere introduced in 1968.

Protein powders started showing up in drug and health food stores in the 1950s with the advent of body building becoming popular. GNC was started in the 1930s and was in every major mall across America in the 1970s, and they sold protein drinks, both liquid and powder. Remember Charles Atlas? Probably not. There have been multiple health food fads throughout American history.

Herbalife stays in business because people are gullible. The multi-level marketing business model appeals to our greed and fear of missing a good deal. None of the products offered by Tupperware, Avon, Mary Kay, Fuller Brush, Amway, and Primerica are unique in anyway and the only people getting rich are towards the top of the pyramid.

A bodybuilder like Charles Atlas or Arnold Schwarzenegger would not have been caught dead drinking protein shakes in the glory days of bodybuilding (i.e., the 1970s/1980s); they preferred real foods, and Atlas was a strong proponent of a milk-heavy diet (and even advocated for a milk-only diet during bulking phases). https://physicalculturestudy.com/2014/12/08/charles-atlass-s...

Thus, 40 years ago (i.e., 1980), using protein powder for weight loss/body composition wasn't a big market. Herbalife created that market. GNC and others started selling protein powders for weight loss and bodybuilding after Herbalife proved the viability of the niche. (Note: protein powder is the cheapest form of protein...today. It wasn't back then. It was comparatively quite expensive. In the 80s, beef and chicken were far cheaper than protein powder.)

If you want to debate exercise history you will want to pick a fight with someone who doesn't have GNC and other health companies as clients...

> A bodybuilder like Charles Atlas or Arnold Schwarzenegger would not have been caught dead drinking protein shakes in the glory days of bodybuilding

The glory days for Charles Atlas was the 1920s to 1940s; he died in 1972. He had sponsorship deals for dietary supplements.

>Thus, 40 years ago (i.e., 1980), using protein powder for weight loss/body composition wasn't a big market.

It was a large market by the by the 1960s. Many famous bodybuilders from the 1920s through 1950s started advocating protein drinks made with dehydrated and pulverized beef, egg, and milk. All the fitness, bodybuilding, and martial arts magazines were filled with protein drink advertising in the 1960s and 1970s. Hell, even Chuck Norris was hawking this stuff in the 70s. You could walk into any GNC in the 1960s and buy this product.

The only thing HerbalLife added was marketing, finding suckers to sell their products.

I'm struck by the unwillingness of people to say they don't know what's going on. But total disagreement on what's going on implies nobody really knows.

People have written an enormous amount on why HLF is/isn't a pyramid scheme. Yet it hasn't gone to zero yet. At the same time, it looks and smells fishy and people seem to agree the products are commodities. So how can it not be a scam?

It seems to me like the logical inference is that there is something hidden below the surface and that even with all the time Ackman and others put into researching it, there's something not public sustaining it.

Even if it's just a pyramid scheme, the mystery deepens, because some people who don't seem to be shills have written an unbelievable amount defending it.

MLM = product sold by multiple levels of distributors.

Pyramid scheme = an MLM in which most income at any level is from sales that end with lower-levels rather than ultimately ending with actual customers.

The FTC investigated Herbalife in 2016, concluding in 2018, and determined that more than 80% of ultimate product sales were to individuals outside of their distributor network...even though their distributor figures were inflated by "distributors" that were just customers purchasing product for personal use at the highly-discounted distributor rate.

Herbalife is an MLM, but it's not legally a pyramid scheme, and the agency that investigates this (the FTC) said as much in 2018. (It did, however, fine Herbalife $$$ for practices that would have resulted in Herbalife being a pyramid scheme if the majority of its product didn't actually get sold to non-distributors.)

I get that. I was just reading John Hempton's long blog post in defense of it, and someone in the comments pointed out that the bulletin board behind some people he photographed, was all about classes on MLM, not about health club type activities.

So I'm saying, yes, at some level it checked out for him and the FTC, but I'm still left wondering if it is what it seems, ironically due to reading the long defense and feeling it had gaps.

I read the defense as well, and the biggest gap to me was the people not in the room, literally. The people who show up to the club are happy enough, but not everyone shows up to the club.

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

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