Notes On Visiting An Herbalife Nutrition Lodge Inwards Queens

I visited a Herbalife nutrition lodge inward Queens. There is enough incorrect amongst this society – but this is non a post most the things that are incorrect amongst the society (most of those I volition locomote out for other people to recall about). This is simply a post most what I observed as well as the implications for Bill Ackman's Herbalife thesis.

(a). There are a lot of Herbalife nutrition clubs inward Queens. This is an Hispanic expanse as well as within the the U.S. of A. Herbalife is mainly an Hispanic phenomenon. If yous role Google satellite navigation on your telephone yous volition unwrap lots Herbalife clubs (dozens are listed around Corona Queens) though some of the ones yous endeavor to locate volition non live at that spot whatever to a greater extent than (suggesting they receive got either moved or closed).

(b). I was told the best fourth dimension to see a nutrition lodge was betwixt 7 AM as well as nine AM so I dutifully arrived at most 7.15. The lodge was empty. I was told to locomote amongst a Castilian speaker because the clubs were pretty unopen to mono-lingual Spanish. The lodge was non signposted from the street as well as coloured newspaper made opaque the windows so a passer past times would non know what was inward there.

(c). I was served “all three” important an aloe drink, a diet suppressing tea as well as the poly peptide shake.

(d). This was the commencement fourth dimension I had drunkard a poly peptide shake. I tin dismiss tell yous they suck - so does the tea for that matter. This materials tastes unbelievably bad. It is flat-out-gross. I sent an electronic mail (with the trusty smart-phone) to a friend inward Asia explaining where I was as well as told him how gross it was. He puzzled: he asked if I was a virgin. He explained that when he was a competitive lightweight rower (he rowed for an Ivy League university) he used to alive on poly peptide shakes every bit he had to hold his weight within the limits. And he exercised extensively on them. Exercise as well as poly peptide shakes is a well-worn as well as proven weight loss combination. But they produce gustation gross. [I receive got been informed that Herbalife gustation slightly amend than some poly peptide shakes at the cost of adding some sugars – also I receive got been informed the texture is much improved past times blending inward a banana or fifty-fifty a mango....]

(e). There were no visitors prior to 8 AM. By 8 AM I was going to sell my entire Herbalife long as well as surrender on the position. My Castilian translator talked to the guy running the identify as well as he told us roughly how many visitors he got a hateful solar daytime as well as told us the fourth dimension they came inward – as well as that it actually started past times most 8 AM.

(f). The translator was correct. The visitors started around 8 as well as inward the side past times side 75 minutes over 20 came in. They came inward roughly to his schedule suggesting that they were regulars. They spoke inward Castilian as well as he spoke to them every bit friends. Most of them were either no longer obese or inward the transition from beingness morbidly obese to (merely) rectangular shaped.

(j). The cardinal product: the proprietor/distributor greeted the visitors every bit friends as well as offered moral back upwards every bit they drank the tea as well as the shake.

(k). There was a serial of earlier as well as later photos on the wall. They were impressive – many of the customers – as well as the married adult man as well as married adult woman squad that ran the lodge – had gone from balloon shaped to roughly rectangular. [I get together earlier as well as later photos are impressive at other weight-loss groups such every bit Weight Watchers - even so inward this illustration at that spot were a lot of impressive photos for a rattling small-scale club.]

(l). The married adult man as well as married adult woman who ran the store had been Herbalife customers for most v as well as a one-half years as well as had been running the lodge for most xviii months. They were truthful believers inward the production – extolling its virtues as well as also repeating to a greater extent than oftentimes than non inward Castilian but also inward Spanglish the benefits of the Herbalife system. [In their illustration they also also extolled the virtue of replacing the fat-and-cheeze laden meals that were non Herbalife amongst something to a greater extent than nutritious as well as the virtue of some practise fifty-fifty if it was exactly walking further.]

(k). The benefits of the Herbalife programme inward the wife's illustration were real. The married adult woman had gone from a 3 insulin shot per hateful solar daytime diabetic to a one-half insulin shot per hateful solar daytime diabetic. [Statistically this should add together over xv years to her life expectancy.] Her prior trunk was balloon shaped.

(l). On the wall was a listing of the 70 strange people who regularly attend this Herbalife club. There was a listing of gilded stars against the names amongst weight-loss as well as Herbalife consumption targets on them. Clearly the gilded stars were business office of the vantage system. This looked a piffling similar primary school.

(m). We asked if he had whatever “downline”. He explained to us that every ane of his pith customers was also a distributor – as well as they were a distributor to larn the 25 pct discount on materials they took home.

Observations

This lodge was non a lodge selling diet drinks (but it clearly did that). It was a lodge selling the social back upwards grouping necessary to potable diet drinks. These diet drinks locomote (especially when combined amongst a modicum of exercise). What happens though is that normal people produce non receive got the will-power to maintain a diet potable as well as practise regime. My friend inward Singapore did – but as well as so he rowed competitively as well as people into rowing are austere driven people (think all those four AM starts).

But I am a fairly disciplined soul as well as - without social back upwards I could non potable these shakes.

In the richer-parts of our society nosotros receive got a solution to diet-and-exercise will-power problem. We hire a personal trainer (usually someone cheerful, younger as well as proficient looking) as well as they cajole us into weight-loss. This is a “for-hire” personal back upwards group.

But Herbalife is some other valid machinery of getting personal back upwards – as well as it clearly worked on the customers I saw. Personally I unwrap it rattling hard non to endorse a production that reduced to ane 6th a person's insulin injection requirement. If Bill Ackman thinks America would live amend off without Herbalife he could politely explicate that at the woman's funeral.

I volition - inward the involvement of fairness - include the original negative observation: the human being who ran this store covered his rent (we worked that out) but he was cheerful human being working hard (80 addition hours a week) as well as making an amount that was less than minimum wage. I get together than many (possibly a majority) of Herbalife clubs produce non comprehend rent (consistent amongst the observation that at that spot are lot of Herbalife clubs inward Google maps that no longer seem to exist). Minimum wage appears to live the upside.

This showed both the produce goodness as well as problems amongst multi-level marketing. The produce goodness is that it allows a society (in this illustration Herbalife) to larn deep into a community as well as that is a necessary business office of the production – the production they are selling is community back upwards for weight loss as well as they can't produce that without getting into the community. The employment is that the society actively recruits distributors to the yell for that it is impossible for the distributors to live proficient businesses. Indeed every bit the rewards to many people inward the chain are on recruitment (and yous can't construct it upwards the chain without a substantial “down-line”) it is probable that recruitment volition hold until the distributors construct zippo (or less than zippo when convinced to sign upwards past times hard-sell rather than rational argument).

There were so many Herbalife clubs around Queens that I suspect on average the Herbalife shops construct something close zippo or less than nothing. The profile of a Ferrari driving Herbalife distributor that Mr Ackman presented was – at to the lowest degree compared to what I saw – ludicrous.

I wrote in ane lawsuit most income distribution inward the the U.S. of A. past times working out how inexpensive my laundry was inward Brooklyn as well as working out that it was beingness done inward a sweat-shop amongst illegal Chinese workers paid nether minimum wage. [I got a lot of flack for that post from my libertarian readers.] The Herbalife distributor I met (who may also receive got been an illegal) had a amend life than those illegal sweat-shop workers. He did non earn much to a greater extent than coin – but his labor was community based as well as he interacted every bit a friend amongst a swell many customers. That I recall was personally satisfying as well as he clearly was happy amongst his lot. And the production saved his wife's life which trumps most things.

Herbalife every bit exploitative inward a Marxist sense

Herbalife is clearly an exploitative organisation inward the Marxist sense. The head-honcho is paid good over $70 ane one m thousand derived from a vast network of people earning minimum wage or less. Dan Loeb (who straight off controls 8 pct of Herbalife) is someone who oftentimes attacks excessive salaries for senior executives. This could larn quite amusing.

Some comments on Bill Ackman's thesis

It was hitting how totally Bill Ackman's thesis vicious apart from observing for exactly a few hours inward a nutrition club.

The best means of analysing Herbalife that I tin dismiss unwrap is every bit alcoholics anonymous for fatty (and rattling oftentimes Hispanic) people. I joke: “my yell is Jose as well as I am fat”.

Herbalife plant inward the same means every bit alcoholics anonymous – past times supplying (and inward this illustration selling) a back upwards grouping to aid yous boot the “fat addiction”.

Like Alcoholics Anonymous it has millions of members as well as looks – at to the lowest degree externally – a fleck similar a cult.

Herbalife similar Alcoholics Anonymous has millions of members because it works. It does non locomote because ane nutrition pulverisation is amend than some other (indeed some nutritionists struggle soy based powders are inferior). Herbalife plant because of the back upwards group.

AA is in all likelihood the unmarried most effective means devised past times humanity to cure alcoholics. It is far to a greater extent than effective than whatever drug developed past times pharmaceutical companies as well as if a drug were devised every bit effective every bit as well as every bit complimentary of side effects every bit AA as well as so it would live worth tens of billions of dollars. Even as well as so AA in all likelihood fails a bulk of times. Herbalife is amid the to a greater extent than successful ways of curing morbid obesity (but fifty-fifty as well as so it in all likelihood fails a bulk of times). [I shudder to recall what a weight-loss drug every bit effective every bit the Herbalife back upwards organisation would live worth though - considerably to a greater extent than than Herbalife's marketplace cap.]

The biggest deviation that I tin dismiss run into betwixt AA as well as Herbalife is that Herbalife is (emphatically) a for-profit establishment (and peradventure quite an exploitative for turn a profit institution) whereas AA is exactly a club.

Lets run through Ackman's presentation past times section

Ackman on Herbalife every bit a commodity

From Page 21 to 26 of the presentation Bill Ackman “demonstrates” that Herbalife's products are non unique – as well as from that he argues that they produce non maintain their cost seat past times beingness a “proprietary product”. He compares the production to GNC as well as other brands as well as notes the cost per serve or the cost per calorie is higher.

This is a consummate misunderstanding of Herbalife's product. GNC as well as other brands are sold every bit commodities. Herbalife is sold amongst a community back upwards mechanism.

In Central Park anyone tin dismiss locomote as well as receive got a run. It is free. It costs yous $20 an lx minutes if yous practise amongst a personal trainer. Comparing the cost of Herbalife (sold through a network) to the GNC (sold without a network) is similar comparison the cost of a run through the commons without as well as amongst a personal trainer.

Bill Ackman has exactly missed the point.

Ackman on Herbalife's lack of advertising

From pages 27 to 31 Bill Ackman notes the lack of advertising expense on Herbalife (which he argues is rattling little) as well as says that they cannot maintain their cost premium that way.

This is of course of educational activity garbage. Herbalife has the best advertising possible – give-and-take of mouth. People volition pay huge sums to Facebook for the promise of getting someone to “like” a production online as well as thence endorse it to their friends. Herbalife has far to a greater extent than powerful advertising back upwards than that – it is deep inward the community.

Alcoholics Anonymous has 2 ane one m thousand members as well as I receive got never seen an promotion for the product. However similar yous I receive got heard of AA. Brand recognition for community based products is (naturally) rattling high. I suspect almost every reader of my weblog has heard of Alcoholics Anonymous without e'er seeing an advertisement.

That said Herbalife does sponsor ane of the biggest football game teams inward the globe (Barcelona). It also sponors LA Milky Way but nobody cares most them!

Bill Ackman on Herbalife's inquiry as well as development

From page 35 to 50 Bill Ackman tells us all most Herbalife's (very thin) inquiry as well as evolution program.

He is of course of educational activity right that relative to its claims Herbalife has a rattling sparse inquiry as well as evolution program. So what: Alcoholics Anonymous – relevant to its claims – has a rattling sparse inquiry as well as evolution program. And yet it is known to locomote for a lot of people as well as the results are good known.

There is enough of inquiry that says social cues are of import inward whether yous receive got drugs or not, whether yous drink. And social cues are of import every bit to whether yous remain fatty or not.

You don't demand a lot of inquiry to tell yous that.

As Bob Dylan says: you don't demand a weatherman to tell which means the air current blows.

The original Bill Ackman mistake

Page 164 of the Bill Ackman presentation lays out the cardinal criteria for determining whether Herbalife is illegal. Here is the slide:

I volition quote this every bit it is the pith criteria for determining whether Bill Ackman is right:

The critical inquiry for the FTC is whether the revenues that primarily back upwards the commissions paid to all participants are generated from purchases of goods as well as services that are non simply incidental to the purchase of the right to participate inward a money-making venture.

Bill Ackman spends most of his presentation arguing that Herbalife's production is the describe concern opportunity. He argues for instance that most the production is sold to "distributors". This was clearly truthful inward the Herbalife lodge I visited. Almost every client was also a distributor. They even so were clearly customers - they came inward - they paid their coin - they drank their shake. They human face similar customers because they were customers.

Bill Ackman calls these distributors victims of a faux "business opportunity". Facts on the ground: they are customers.

That fact is rattling inconvenient for Bill Ackman because if they are customers as well as so Herbalife is legal as well as Ackman's thesis falls apart totally.

Bill Ackman's logic every bit to why these distributors could non live customers is disarmingly unproblematic - as well as amazingly erroneous. Bill Ackman argued that it was illogical for someone to sign upwards every bit Herbalife distributor for the 25 pct discount because fifty-fifty amongst a 25 pct discount the production was to a greater extent than expensive than commodity production available from GNC as well as other suppliers. [My Castilian translator came dorsum to me amongst an errata on this point: he says that some of his downstream were considering the describe concern chance - but the bulk were distributors without whatever plans at all on the describe concern opportunity.]

That is true. But it misses the point.

Remember those gilded stars as well as the back upwards group. If yous purchase weight loss shakes from GNC yous produce non larn the gilded stars. Buy the production from GNC as well as yous are non business office of this Latino self-help group. By non agreement Herbalife every bit a social back upwards grouping for weight loss as well as past times analysing the production every bit a commodity Bill Ackman has failed to unwrap what globally would add together upwards to millions of customers. Real customers. The customers that construct Herbalife legal.

What this story is actually about

Herbalife is a society which combines a lot of proficient (think the life-saved diabetic above) amongst some pretty ugly features.

But this is non actually a story most Herbalife - Herbalife volition live on globally. Like all multi-level marketing schemes it volition receive got its ups as well as downs. There volition live all sorts of problems (such every bit revenue enhancement compliance throughout the scheme, cash handling, perhaps even using Herbalife accounts to wash money).

What this has (deservedly) larn is the story most how Bill Ackman tin dismiss live so wrong. He spent (by his ain admission) a twelvemonth as well as a one-half analysing this society as well as his thesis tin dismiss live falsified past times visiting a few clubs inward his abode city. Bill Ackman's thesis is the most easily falsified bear-thesis I receive got seen from a major hedge fund ever.

You receive got to wonder how this happened. So I am going to tell you: 

Bill Ackman a Harvard educated (magna cum laude) billionaire New York hedge fund director bet over a billion dollars on a curt seat (imperilling his fund as well as his reputation) without checking the facts.

And he did non banking concern check the facts because he was so stiff amongst a misplaced silverish spoon that he could non stoop to sit down on a subway for 30 minutes as well as verbalize amongst piteous people for 90 minutes.



John