Why Should You Care About Herbalife?

Why should you care about Herbalife, if you don't drink its shakes or invest in its stocks?

Because it may affect the MLM industry as a whole.

So is Herbalife a pyramid scheme?

Depends on how you look at it.

I wrote an article for SeekingAlpha. Here's my conclusion:

Are Your Thought Really Your Own?

Auklet flock, Shumagins 1986 (Photo credit: Wikipedia)

With upcoming Superbowl, there will be people cheering, caught up in the mood, all over the country, even people who don't ordinarily love American football.

There is a term for this... "herd behavior"

Sounds dumb, but it's absolutely real, and a herd can be good... or evil. 

A "good herd" is when people united for a cause for good, like disaster relief, fund raising for ethical causes, and so on. 

A "bad herd" is basically a mob, and a mob, almost anonymous mass of people, will do things like arson, looting, assault, rape, and activities that the individuals would not dare do on their own. 

The point is people in a herd are merely following. They don't always agree 100% with the cause, but they are willing to be caught up in the moment. 

And recruiters / scammers know exactly how to exploit this herd behavior by organizing meetings and events to make you feel like a part of a group and let the "groupthink" override your own thinking. 

Why do victims prolong the lie?

English: Photo of Notre Dame linebacker Manti Te'o taken in 2010. (Photo credit: Wikipedia)

Recently, in the US, the sports star "Manti Te'o" and his fictional girlfriend was very big news. Basically, this guy told the world that his girlfriend died and that the win was dedicated to her. Except this person does NOT exist.

Now, Manti Te'o admits that he knew it was a hoax for... six weeks, and said nothing, until Deadspin blew the lie wide open.

Rather than admit that he had been duped by his best friend and repeated something untrue on national TV (he did not know it was untrue at the time), he chose to continue the fiction, knowing it's a lie.

So he went from victim to participant / liar.

Why would a victim of the lie continue to lie, in order to cover the lie and perpetuate the lie?

For one word: shame

Or in other words, when ego overruled ethics.

And scammers do that ALL THE TIME. As do alleged "victims" of scams, when they have something to gain from continuing the the lie.

Self-Serving Bias and MLM

‪Norsk (bokmål)‬: Grafisk presentasjon av hvordan distributører i flere nivåer kan tjene penger i et levedyktig MLM-konsept. (Photo credit: Wikipedia)

MLM is a heavily ego-driven enterprise that relies on selling, and as such, self-serving bias is RAMPANT.

What is self-serving bias? It is the tendency of your mind to attribute positive outcome to your own brilliance, and negative outcome to external factors beyond your control.

For example, let's say you pitched your product to a Mr. Smith.

Positive outcome: you made a sale! You were brilliant! All those sales techniques worked!

Other possibilities you did not consider: the guy actually needs it, he just want to get rid of you, product is good (not necessarily sales technique)

Negative outcome: You did not make a sale. The guy probably hates MLM. The guy clearly don't need this product.

Other possibilities you did not consider: your sales technique sucks, your product sucks

Self-serving bias is when you attribute success to yourself, and failure to others. 

Note that when one's depressed, the attribution can flip. Success is due to luck, failure is due to self. Clearly, you need to have a good balance.

Is Amway like the Mafia? One Expert Says "yes" (not me)

Do you know how is Amway run on the inside?

Do you know how is the Mafia run on the inside?

Do you know how similar is Amway's organization to Mafia's organization?

More similar than you thought.

G. Robert Blakey, a Mafia expert (so expert, he drafted the RICO law that was later used to bust the Mafia) wrote a paper (when requested by Proctor and Gamble, when P&G sued Amway) comparing Amway with the Mafia.

His conclusion?

It is my opinion that the Amway business is run in a manner that is parallel to that of major organized crime groups, in particular the Mafia. The structure and function of major organized crime groups, generally consisting of associated enterprises engaging in patterns of legal and illegal activity, was the prototype forming the basis for federal and state racketeering legislation that I have been involved in drafting. The same structure and function, with associated enterprises engaging in patterns of legal and illegal activity, is found in the Amway business.

Hmmm...

10 Dumb Things Apparently Brilliant MLM People Do

Português do Brasil: Representação gráfica do marketing multinível (Photo credit: Wikipedia)

Brilliant people do a lot of things, but that doesn't mean you should emulate all of them. David DiSalvo compiled a list of 10 such things you should NOT emulate, and those are quite interesting, as many of them are used by MLM folks.


1. Speak with the “official style” to sound like an expert.

A lot of MLM and marketing message is "fake it till you make it". You can't sell? Sell! Once you sell enough, you'll be better at it. And one of the easiest ways to sound authoritative is to lace your speech with jargons and fancy scientific sounding terms, and that's just bull****.  You may impress the unscientific folks with pseudoscience... and alienate the more... discerning people.


2. Find the irony in everything and point it out to everyone.

Hmmm. This one is not used much in MLM. Forget this one.


3. Presume that ideas are more important than people.

This one is heavily pushed by MLM, about easy money, any one can do this, blah blah blah. People doesn't matter, just follow the system and you will succeed, etc. etc.


4. Presume that those with degrees from non-exemplary institutions are going nowhere and treat them accordingly.

MLM is very guilty of this, as they go by name recognition. This company was headed by this guy from another company. That company has a deal with certain big name. This product is certified by something or another. This guy hired a big name attorney to check their company. While not specific "institutional", it's the same idea: endorsement by association, and that's a fallacy.

Two more opinions on Herbalife "1 billion dollar bet"

NPR's Planet Money, a podcast on money and economy, did an episode on Herbalife's "1 billion dollar bet" where it actually interviewed Bill Ackman, the guy who made the bet, and did a bit of background briefing. It didn't go into any specifics on MLM law, but it is good for some background material.

Go listen to the podcast.

http://www.npr.org/blogs/money/2013/01/18/169719749/episode-431-a-billion-dollar-bet-against-weight-loss-shakes

Now read this report by a guy who went to one of those Herbalife "nutrition clubs"... and came away with a very different conclusion than you may expect.

http://brontecapital.blogspot.com/2013/01/notes-on-visiting-herbalife-nutrition.html

Who's "right" and who's "wrong"? This is going to be one of of those "depends on how you view it" questions.