If Herbalife Was a Pyramid Scheme, It Would Have Collapsed By Now

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herbalifeOne of the most common arguments used against those who deem multi-level marketing companies pyramid schemes, is that pyramid schemes collapse. Because Herbalife hasn’t collapsed, it must not be a pyramid scheme. Because the company has avoided total collapse for more than 30 years, it can’t possibly be a pyramid scheme. That is false, and I will demonstrate the falsity with the help of Bill Ackman.

Recruiting is the Name of the Game

A pyramid scheme has been defined as a scheme in which the participants obtain their monetary benefits primarily from recruitment rather than the sale of goods and services to consumers. Continue reading

Bill Ackman on His Herbalife Short

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Herbalife (NYSE: HLF) has been hit by a short seller again. Earlier this year it was David Einhorn simply asking questions about the business. This time it is Bill Ackman calling Herbalife a pyramid scheme and laying out his case.

Pyramid scheme allegations are nothing new. Each time, Herbalife vehemently denies it is a pyramid scheme, and says it’s a legitimate company, with legitimate products, and a legitimate business opportunity. It is this “business opportunity” that merits the pyramid scheme allegations.

Herb Greenberg of CNBC has been researching Herbalife for a long time. Back in May, Greeberg pointed out the reasons he thinks investors should worry about Herbalife: Continue reading