Herbalife

Introduction

0:00wait can i tell you my one piece of like fun and exciting news yeah so you know i moved recently and made a selection of where to live in the like fall slash winter it's now spring and all of the plants in the yard have started blooming and i'll tell you what's fucking fun

0:30michael as it turns out i have two blueberry bushes a cherry tree and an apricot tree fruit four days no more ultra processed foods only homegrown flaming hot cheetos yeah uh when i

Childhood Memories

0:46was growing up we also had a blueberry bush in the backyard it's like a cherished memory from my childhood like eating these homegrown blueberries and then one day when me and my brother were like i think five and seven or something we beat it with sticks and then it never gave blueberries again i was about to be like oh my god we also had blueberry bushes in the backyard it was also a cherished childhood memory of mine yeah but then you really lost me at beat it with sticks and somehow killed a blueberry bush but you were not a boy a little boy who was like i need to inflict

1:19violence on this beautiful thing for no reason i was a little girl who was uh drinking pond water

Show Introduction

1:27and calling it magic potion this explains so much about us there's kind of no point in saying our names at the beginning of the show anymore so we can just say i'm someone who beat a blueberry bush with sticks i'm someone who drank pond water absolutely okay so i i have a tagline oh it's not about pond water and blueberry bushes well it's potentially libelous depending on what we decide in this episode can't wait welcome to maintenance phase the podcast that wants you to recruit two of

1:58your own podcasters and then if they recruit two podcasters and they recruit two podcasters if you'd like to support the show you can do that through patreon at patreon.com slash maintenance phase you can also subscribe through apple podcast premium it's the same audio content same stuff michael ombre we are talking about a company that makes its own magic

Herbalife Business

2:24potions out of pond water oh herbalife mike do you know anything about herbalife are you familiar the thing is i'm only familiar with this vaguely through i guess it was like financial media there was a whole thing with short selling this stock and the whole debate hinged on like is this a real business or is this an mlm yes that was a big part of it absolutely and i think you're right that the way that the story gets told is like super investor v super investor yes and that's the primary way that

2:58the story of herbalife has been told but they are a weight loss and wellness company yeah this is okay this is what i could never actually figure out is what does this company do great which is also one of my like telltale signs of an mlm when you go on their website you're like sorry what are you selling one of the other telltale signs of an mlm is if there's they don't tell you the prices of their products on their website and if there's not like a buy now button there's just a like find a local

3:28distributor like you know you're done so yeah not something businesses typically do so herbalife sells supplements shake mixes protein bars vitamins energy drinks sort of the whole shebang okay they are

Multi-Level Marketing

3:43as you noted a multi-level marketing company sometimes people describe them as a pyramid scheme in different countries there is a distinction there right between multi-level marketing and a pyramid scheme pyramid schemes are um illegal and multi-level marketing is not wait what's the fucking difference between an mlm is a pyramid scheme i would agree with you colloquially right that i'm like whatever fucking same difference yeah there are distinctions in the definitions and i think the tipping point in a number of those is that a pyramid scheme is where you get officially that like your money is coming

4:20from recruiting other people way the fuck more than it's coming from actually selling the product oh it's all bad but fair enough there's a difference okay so their products for folks who are unfamiliar

Product Sales

4:31with multi-level marketing their products are sold by independent distributors who also recruit other independent distributors this is like amway this is like plexus this is like optivia if one of the sister wives is selling you a shake on instagram yeah just steer clear buddy go to the store and buy normal products when you need a product i shouldn't say they're all ex-sister wives now okay there's there's only one wife left so and now they're like i always knew he was a monogamist and i'm like this

5:05is very funny is that show called sister wife now singular so in multi-level marketing when you recruit someone else to become a salesperson they become part of what's considered to be your downline that's the term that they use and when you have a downline you get a commission off of their sales okay so the sort of famous thing about multi-level marketing is that there are people who get super rich it's just like the first 10 people yeah yeah yeah yeah and almost everybody after that gets a much shorter end of

5:40the stick than that because you're being promised that you're going to recruit a bunch of people but these things kind of always top out because there just aren't that many people who want to do this i don't want to hide the ball around 90 of herbalife distributors make little or no income which the company itself stipulated in 2013 according to the la times right so everyone here agrees the company agrees distributors agree more than 90 of people are making little or no money off of this and are

6:11actually in the hole because they had to buy some inventory to get themselves started it's funny how like i thought this was going to be like is this a scam or is this not a scam you're like stipulated it's a scam no no no no we're just starting out with 90 of people making no money i do not even want to leave any room for people being like maybe it's okay it's really not okay yeah the other thing to

Company History

6:34know about herbalife is that they've been around for over 40 years they're about the same age as whole foods i didn't know as a company they're older than me look at her flexing look at her flexing i'm young and spry i'm as old as an mlm herbalife was founded by a guy named mark hughes who was born on january 1st 1956 in la mirada california mark's parents divorced in 1970 when he was about 14

7:07and his mom had sole custody after that it is clear that hughes life as a kid was not easy by his own account his mother had what he referred to as quote-unquote emotional problems and the family subsisted on public assistance programs hughes dropped out of high school as a freshman so at around 14 and described himself as quote a little delinquent who got in trouble with the law okay he said that he used drugs uh predominantly amphetamines and barbiturates

7:42so by the time he was 16 he was sent to a troubled teens boarding school well another another episode we gotta do it's a troubled teen incorporated shit so rough leak yeah this one the one that he was sent to is called cdu cdu oh like the jet skis like the jet skis cdu is a troubled teens boarding school in california that was run by synanon mike do you know anything about

8:14synanon yeah i used to go there in the mall all the time no no you get like one of the you get a you get the center of the role one uh-huh that's the one you asked me the little question because you knew i was gonna make that terrible joke oh wait sin is it like alcoholics anonymous but it's synanonymous no synanon was an organization founded in the late 50s synanon was really unusual at the time it focused on drug users helping other drug users move towards sobriety interesting however over time and like not very much time the organization really kind of curdled and is now widely described

8:51as a cult oh cdu the troubled teens sort of portion of it was famously absolutely no picnic i can't believe being mean to teens is not a sustained model unsurprisingly there was a lot of abuse that happened at cdu right by sort of all accounts of people who went there this is actually the place that paris hilton went when she talks about like the abuse that happened to her when she was a kid holy shit all that is to say mark hughes as a teenager is in a rough place so one of the programs

9:24at cdu required him to sell raffle tickets okay also everything is so scam adjacent everything and hughes proudly told the press for pretty much his whole life that he was the school's highest grossing salesman and i was like god damn it if you ever catch me telling a reporter about how i was the best at something in high school like put me out of my misery you know what i mean were you voted anything in high school nothing not a goddamn thing you didn't get like most like most promising

10:00or anything no i was at a real overachiever school oh and i was sort of like middle of the pack amongst kids giving themselves stress ulcers and that kind of thing i got most dramatic and most romantic gayest and gayest well yeah i it basically meant that i was covering up my homosexuality with misogyny but doing it badly those two things come together so mark hughes went door-to-door in la for this cdu program selling raffle tickets he claims that he managed to get a 500 check from uh someone

10:37who was then the former california governor but not yet president ronald reagan oh i mean okay whatever it does tell you about that guy that he's like you'll never believe who i met reagan yeah look how cool i am look how cool i am reagan right although i was once on a flight with shakira and i do actually think that makes me cooler dude what the fuck are you kidding me i was like mega late for a flight and i i don't know how it fucking works but like i think celebrities they like get everybody boarded and then they're like whisk a celebrity on to first class because shakira can't be sitting there as

11:10everybody's filing past right and like getting their luggage in the bins so it's like everybody was boarded and then as they're like sneaking shakira on i like run up to the gate and i'm behind this like giant starburst of hair in this like very small human being she's very short and i was like what the fuck and then she sort of turned around and looked and i was like oh my god you're shakira but i didn't say anything and then she got on and i got on my flight but anyway look how cool i'm do you say your estimation of me has expanded i would say my estimation of shakira has expanded

11:40that she like flies commercial she understands the stakes of climate change she walks among us so mark really seems to find meaning and success in this raffle ticket sales business and gets really into it when he is 19 he's still out at seadoo and his mother passed away she died in her apartment and her toxicology report showed that she had darvon or darvacet in her system her doctor acknowledged

12:11that she frequently abused prescription drugs and was engaged in some like doctor shopping oh man but also like this is happening in the 70s when there's just like way less literacy on substance use disorders in general right and doctors are like have you tried speed totally you're trying to lose three pounds why don't you try meth so hughes had just completed this troubled teens program after being a pretty heavy drug user himself and then his mom dies of what appears from the autopsy to be

12:44an overdose trauma wise especially for a 19 year old this is like an earthquake right yeah his mom passes away when he's 19 the very next year he started selling diet drugs professionally okay so in 1976 he started selling something called slender now for safe worth laboratories and then moved on to selling diet products for a place called golden youth okay both of those were mlms nice both of

13:17those went out of business nice and that gave mark an idea what if he started his own cursed weight loss company right this is something me and peter find in these like grifty self-help books all the time and like financial scam books it's like oftentimes the people giving grifty advice are like victims of grifty advice yeah yeah absolutely in 1980 mark is 24 years old and that is when he founds herbal life he talks about starting the company quote unquote out of the trunk of his car and then they pretty

13:51quickly get production space set up in an old wig factory in beverly hills and when they said an old wig factory in beverly hills i was like we've been here in this era before early 80s beverly hills wig factory i hope that it is wigs today the establishment where richard simmons made friends with the proprietor of the wig shop is that true not to my knowledge okay wigs today kept operating but i like thinking that this place maybe had supplied wigs to wigs today i don't know i got really excited

14:26about it and then it wasn't anything also what are they selling right now it's pills they are selling at this point their main thing is like essentially just like a powdered shake mix so this is another challenge of herbal life but honestly a lot of mlms is that they're selling like a shake mix and their shake mix is not like proprietary it's not super different than other shake mixes on the market

14:57but it'll be like 40 for a canister of shake mix when you can go to the store and get like a giant canister of slim fast mix right for like 10 bucks or something right like so that's part of the uphill battle here is that they're selling stuff that's like you can also go get a lot of these things at the store so you have to believe that there's like some magic beans in the in the herbal life stuff or something right right his wife at the time his first wife says that she was a co-founder of

15:31the company but that when they split up she was sort of scrubbed from any of the company's materials okay later when uh journalists ask hughes about her role he says that she was actually just the first employee and acted as quote my first secretary to which i say get fucked asshole again this is all just five years after leaving cdu and after his mom's death and by this point he has started talking about his

16:05mom's death a little more publicly and he's using it essentially as an origin story for himself so i am going to send you a clip oh okay now i'm very excited about talking about herbal life because herbal life has been something that not only that i wanted to do for a long time but it's something that's very very important for me just about everybody in my family's had a weight control problem especially my mother's i was growing up she was always trying to you know diet and trying some kind of goofy type

16:38of diets and so on and and uh eventually she went to doctors to try to get it cleaned up and they prescribed her a product called dexamil and for those of you who are not familiar with dexamil it's a speed it's a narcotic it makes you not be able to eat it makes you not be able to sleep and from several years of using this particular drug she ended up having to use sleeping pills to be able to go to sleep at night and from several years of doing that she secretly behind doctor's back started getting her prescriptions spilled and she started seeing three and four and five doctors

17:09to keep her habit up and when i was 18 years old she died from an overdose and it seemed to me at that time that there was a lot better things that people could go out and do to themselves and just destroying their lives to try to lose weight and uh because i've seen literally people do everything to themselves to try to lose a little bit of weight people are even joining mlms to lose weight it's funny i thought he was leading up to like she started on this drug and then she started taking this other drug and that's what we're selling at herbalife this is her she lost 30 pounds yeah yeah his father

17:43later told the la times that he was like i don't know what this guy's talking about his mom was not fat she overdosed on painkillers like it's pretty straightforwardly just like a drug dependency story that's actually really dark both versions are extremely dark yeah right either it's my mom overdosed on drugs and i'm gonna figure out how to spin that up to sell weight loss supplements to people right or it's weight loss drugs are responsible for my mom's death so that's the business i'm going into

18:17yeah yeah neither one is like great news right as if the solution to his mom's alleged problem is like well there's a better weight loss method absolutely right like that's not the issue here yeah regardless of all of that herbalife very quickly takes off they very quickly build their ranks of distributors

Regulatory Issues

18:37and their ranks quickly build their downlines by 1985 ink magazine was reporting that the company's growth from 36 000 in uh sales in 1980 to 423 million oh wow in 1985 wait really that's insane you have become a billion dollar company by today's dollars right right by the end of those same five years herbalife is reporting that they had more than 700 000 distributors wow distributors were encouraged to

19:11share their own sort of personal stories of using herbalife if they don't have a personal story they are instructed to quote unquote get one from a friend which i think is very funny nice i'm crowdsourcing my like memoir and a great job everyone there's a little bit of reporting from the la times in 1985 this is a long time distributor whose last name is delacy and i just sent it to you showing that she has learned her lessons well delacy hiked up her white herbalife sweatshirt to display

19:41the scar that runs the length of her chest and abdomen from a 1977 heart bypass surgery i was on eight medications for my heart i take no more drugs now i take herbalife i've never felt happier and healthier in my whole adult life delacy quickly added herbalife cures nothing wait wait wait delacy quickly added herbalife cures nothing we can't make medical claims you know that's a funny thing to include it's so funny that she's like doing the thing and then it seems real like it really

20:13seems like something popped up in her brain and was like don't forget reporter and she was like yeah do you ever find yourself like talking to someone you don't know that well and then you say something and you realize as you're saying it that it's not true she's like oh my god i'm like totally fixed this is great it's not great i'm not allowed to say this okay so we've been talking about this like exponential growth that herbalife has been going through in these first few years of its inception right what we haven't talked about is the other thing that starts growing exponentially in that time

20:48and that is fda consumer complaints about herbalife you worked on that transition for so long i did i'm so proud of you it's not even written in my notes if if every fda complaint gets five more fda complaints all the fda complaints in the world yes within just one year of the company's founding the fda starts getting consumer complaints about herbalife products perfection customers complained of taking herbalife products and then experiencing nausea diarrhea headaches and constipation

21:21distributors were reportedly instructed to tell people that that was all part of getting toxins out of your body oh yeah i mean when you think about it pooping is getting toxins out of your body so like they're not they're not incorrect are just herbalife products there's this thing that your body does where it creates waste then you have to get rid of the waste so the fda focused on herbalife's slim and trim formula two okay which herbalife said could quote cleanse the digestive

21:51system and curb the appetite sure as it turned out uh slim and trim formula two contained mandrake and poke root what the fuck mandrake is a hallucinogen that is famously toxic and can cause asphyxiation that is an enemy in dragon quest you are incorrect and every part of pokeweed can be toxic but none more than the root and that is what they use they're just like why would they even do this there's pretty random shit in there right they're sort of doing a thing part of the kind of origin

22:23story of the company is that mark hughes went to this like uh herbalism sort of seminar led by a group of chinese nationals and i'm just like sure man this is such deep early 80s shit where it's like i met a person from china once and they taught me about herbs and now i'm teaching you about herbs although it is interesting because it does indicate like some level of good faith that like he probably thought these were healthy and he put them in his product without really looking into it it's not like

22:54he's like selling sawdust it's sort of like he doesn't know it's a scam necessarily he thinks that these are actually beneficial listeners mark this moment down where mike says he doesn't know it's a scam foreshadowing as a narrative device much of the notice of adverse findings from the fda focused on what was called herbal life's career book which was its product guide for distributors to help them pitch products to customers the career book said that formula two can also help with quote venereal disease arteriosclerosis tumors bad breath and bedwetting i love this is another thing we see

23:30all the time where it's like oh this like this cures acne and like hiv even if there's like no biological mechanism by which that would happen it also claimed that a product called cellulose oh was a natural cellulite eliminator and they were like no you don't hear that much about cellulite anymore there were so many products for cellulite back in the day you know what you hear about now is crepey skin i am absolutely crepey skin years old are you really i am a food truck outside of the

24:02louve i am all crepe so the fda issues its adverse findings its notice of adverse findings in 1982 by 1984 canada's department of justice filed charges for false medical claims and misleading advertising practices nice the company just pleaded guilty to the canadian charges and paid eight thousand dollars in fines and kept on oh my god you could pay that a day and it wouldn't meaningfully cut into your revenue around this time the company starts facing some questions and criticisms around

24:35its claims of expertise so i mentioned earlier mark hughes had an official bio with the company which said that he had learned about herbs at a symposium hosted by a trade delegation from china okay when an la times reporter pressed him on it he admitted that he had never gone nor had he been trained in any kind of herbalism no way what so were you just lying about that it's a symposium it's not a degree yeah it's not even like cool you did this right it's like i spent an afternoon doing a thing is what

25:09they're lying about and then as soon as he gets questioned about it he's like whoops never mind that's like i recently heard of a podcaster who lied about seeing shakira on a plane just to seem cool i know where i heard that did you did you not see shakira no i'm kidding i'm kidding i did actually see shakira i was about to be heartbroken the thing is it was it would be a really funny thing to lie about because it's not impressive it's like yeah okay a person exists so in addition to mark hughes credentials coming under fire so did the credentials of one of his

25:40colleagues richard marconi was hughes right-hand man at herbalife and managed manufacturing of herbalife's products he also sort of acted as like the science guy to sort of justify the company's products from a scientific perspective um and was frequently referred to as dr marconi right yeah get just get yeah now i know where it's going again context clues honestly even his role as science guy seemed to amount to a lot of hand waving at the time where he'd be like herbs nutrition science right yeah

26:15they're putting poison mushrooms in the fucking smoothies of course here is a quote from the la times businessman richard marconi manufacturer of herbalife food supplements and the man hughes turns to for scientific backup has represented himself in nutrition publications since 1983 as a doctor of nutrition but marconi who operates out of two orange county plants got a mail order doctorate in 1984 from dunsbach university school of nutrition an unaccredited correspondence course in huntington beach

26:45i've been calling him doctor ever since we got started hughes said adding i got more credibility and so does dick than anybody else in the weight loss business that is true but also bad because of our results so i don't care about his degree i don't care about anybody else's degrees great sign i don't know why it makes it worse that the correspondence school is based in huntington beach but it really does he has a doctorate from the outdoor gym where buff guys go to do pull-ups this is so close to the simpsons like dr nick went to hollywood upstairs medical school joke

27:21the company's regulatory issues and legal issues just keep getting worse from here in 1985 california's attorney general filed suit against herbalife saying that they violated laws against essentially pyramid schemes and that they lied about the caffeine content in their products oh that's dangerous the company once again ultimately settled for eight hundred and fifty thousand dollars without admitting any wrongdoing according to california's ag that was the largest settlement with a diet or

27:57wellness company to date in the state's history i mean that's also kind of sad because you should be doing bigger settlements than that and also they should be admitting wrongdoing that same year a u.s senate subcommittee called mark hughes to testify about herbalife and for context we're going to watch a clip a panel of medical experts had testified the day before and then mark hughes comes up to testify during six days of grueling televised hearings in which herbalife was the main focus

28:31mark's confidence in his products and his dream never wavered and they should have been brought to this hearing instead of the so-called expert weight loss people that were here yesterday i think if they're so expert in weight loss why were they so fat yesterday it seems to me and i'm not trying to make any jokes but i do think that they ought to use our product we're gonna cut it there he seems nice what a blast i'm doing i run a weight loss company because i hate fat people you're like a huge piece of shit if you're including fat i hate fat people and i hate doctors and there's no one i

29:05hate more than doctors who i perceive as being fat also why the fuck is this documentary being like he he never stopped chasing his dream or whatever oh honey this is herbalife shit oh this is like herbalife propaganda yes this is them being like look how good he did wait they chose this clip to fucking show they're like nailed it mark nailed it get those fat doctors my notes just say nightmare blunt rotation yeah in the hearing they also discussed an internal study conducted by herbalife based on a sample of 428

29:39herbalife users that study allegedly found that 40 percent of users had experienced significant symptoms as a result of using herbalife products nausea diarrhea heart palpitations headaches all kinds of stuff right i will say those side effects didn't surprise experts who were familiar with the products a number of herbalife weight loss ingredients were just super strong laxatives and high doses of caffeine when i think of my weight loss journey i think of how i want to be jittery and pooping all the time

30:13that's what that's the that's the life that awaits me well michael i've got both a product and a business opportunity for you that's how you recruit people have you thought about being jittery and pooping so even amidst all of these charges and investigations from multiple jurisdictions and multiple nations herbalife just sort of soldiers on for years it certainly takes some hits both in its public perception on some level and in its you know having to pay these fines but its sales remain in

30:47the hundreds of millions right yeah in that same time when they're facing all of these charges from all of these different countries they expand into japan spain new zealand israel and mexico amazing on top of their existing presences in the uk the u.s canada and australia by 1996 the company was operating in 32 countries why why let a little lying get in the way of growth that's right hey gang editing mike

Marketing Tactics

31:19here uh we recorded this episode in a couple different sessions because we were having some lawnmower issues over at aubrey's house and when she came back for the third little session uh her mic input got switched from the microphone to the laptop so that is why she is going to sound a little bit different for the rest of the episode just wanted to let you know and thank you for bearing with us so herbalife keeps facing scrutiny and also keeps expanding in a pretty uninterrupted way until

31:52the summer of 2000 on may 21st 2000 mark hughes died in his home in malibu he was 44 and was survived by his nine-year-old son which is just a real painful echo of the stuff with him and his mom so initially they say it's natural causes but when the coroner's office released its autopsy results they attributed his death to alcohol doxepin intoxication doxepin was prescribed to hughes as an antidepressant

32:30but after his death people in the company start telling a really different story about him and his health okay a few of his colleagues told reporters after his death that they had sort of hatched a plan that never got executed to take mark hughes to a swiss treatment center for alcohol abuse okay also as it turned out he had been arrested twice for drunk driving in the few years before his death oh wow so

33:01this was like a known thing about this guy and the company had done a really effective job of sort of keeping the lid on it also it was well known enough within the company that there was like plans and strategies and stuff so it really it must have been like quite bad his colleagues actually like say this to reporters that they're like we really knew that if news of his drinking got out that that would be bad news for like all of our jobs and for the company so they're also invested in a pretty direct self-interest kind of way and keeping it concealed right so you would think that this kind of

33:37you know event would be a real hit to the company but the company continues to sort of soldier on even after the loss of its founder and throughout the 2000s they just keep getting sued and sanctioned interestingly the lawsuits aren't from customers they're from former distributors right so one class action lawsuit is filed in 2002 another is filed in west virginia in 2003 they had a class action

34:10settlement in 2004 with 8 700 distributors who accused the company of uh running a pyramid scheme again they settle for six million dollars they admit no wrongdoing and they move on this is sort of their whole thing right yeah in 2005 there's a california class action lawsuit around herbal life's marketing practices they get sued around using auto dialers that violated the telephone consumer protection act i mean it's just like one after the next right in 2004 israel's health minister

34:44investigated herbal life and found that there was a causal relationship between herbal life's products and liver damage oh in 2007 a swiss study found a link between consuming herbal life products and contracting hepatitis oh my god part of the reason i don't have more detail here is that there are a handful of studies on herbal life products in particular but there are some real challenges to getting good data on them one is that the company is not disclosing what it considers to be like

35:19proprietary blends of whatever so it's not telling people all of what is in their products great sign great sign but also a bunch of people who come in with these like this liver damage with all of this sort of stuff that is allegedly attached to herbal life product when doctors say hey what are you taking they don't actually volunteer the herbal life stuff because they're like it's not a prescription medication and it's just good for me so there's nothing why would i tell you about that right so it's really sort of hard to nail down from a research perspective to remind everyone this is the sector

35:54that people like rfk jr want to have way more power because he's like anti big pharma yeah nutraceuticals say what you want about big pharma but at least there's actual regulation of what the fuck they're selling to you and like products have to be tested that can also be better but like this sector is just they can just say anything and sell you fucking anything okay but counterpoint what if there was no regulation for anyone yeah what if wouldn't that be better so there's fast fallout from all of this spain's health minister issues a public caution against using herbal life products but after

36:28investigation they retract that statement for the same sorts of reasons it's just really hard to prove in a causal way right right in 2011 courts in belgium ruled that herbal life was in violation of the law by operating a pyramid scheme but herbal life then appealed that and won so they're getting regulated and then it's getting overturned we're not a pyramid scheme you assholes we're pyramid scheme adjacent we're an mlm after mark hughes untimely death herbal life starts bouncing back with some new marketing

37:05tactics and a number of these will be how many of our listeners will know herbal life to begin with one of its more conventional moves in the marketing world was that it goes really big on celebrity endorsements yale yale yale yale is it her it's shakira it's your old pal shakira my close friend shakira they get celebrity endorsements from a number of huge deal soccer players cristiano ronaldo does a bunch of endorsed content for them at two cristiano ronaldo messi does a bunch and they sponsor

37:43the la galaxy so every time david beckham plays at the club level he steps out onto the pitch with herbal life written across his chest nice okay according to the la times that was the result of a 10 year 44 million dollar sponsorship i like how we've also named literally the only three soccer players i could name gun to my head that's the only one and he hasn't played soccer in like four decades it's like those three people are the only soccer people i know so michael you're probably

38:20thinking we're talking about all these soccer players there's one big name missing we're gonna watch an additional uh celebrity endorsement i thought i could keep this secret from you i can't so i'm gonna just send you the link now wait what you're fucking kidding me i am barely even a celebrity bullshit she's barely a celebrity tell the people who we're talking about okay you just sent me a link called madeline albright and herbal life in a million years i never would have guessed this

38:53former secretary of state madeline albright i think that um women are a huge undervalued resource in every country and i have believed that when women are politically and economically empowered societies are more stable and the part that i like about what you do with herbal life is women are very good at interpersonal relations and madeline developing a a relationship with the person that they're dealing with and i think that uh the kind of sales operation that herbal life has is the one

39:30that really allows women to shine oh my god about family health and nutrition that's kind of what women do on a daily basis and so madeline no i think they are a very natural sales force for you women are really good at being scammed and scamming others there you go i mean not that i'm like so fucking disappointed in madeline albright i know but like to use this sort of women's empowerment language to defend a scammy business that is selling scam products it's not like they're selling

40:05like bananas or like something useful they're selling fucking scam products for weight loss according to a new book that was released this year about multi-level marketing called little bosses everywhere madeline albright's firm was uh reportedly paid 10 million dollars for its work with herbal life yes they underpaid for beckham and they overpaid for madeline their wildest endorser was someone named lewis ignaro ignaro is really worth talking about because he won the nobel prize

40:39for medicine in 1998 okay for his work focusing on cardiovascular health particularly the function of nitric oxide ignaro endorsed herbal life's heart supplement which sold for 90 a bottle for a month's supply for a month three dollars a day they used his signature on the bottle and the bottle also noted that he was a nobel laureate according to sec filings ignaro's company received at least

41:12one million dollars from herbal life sales in just over one year dude some of his work for them appears to have been publishing studies in academic journals oh my god so first he published two mice studies about vitamin c vitamin e and arginine which is an amino acid those are all advertised active ingredients in a specific supplement from herbal life dude what if we had what if we enter a world where winners

41:47of the nobel prize like come out to receive it also wearing branded jerseys they're like vodafone he published those papers without disclosing his existing financial relationship with herbal life he was a professor at ucla at the time ucla also issued a press release that didn't acknowledge the relationship i'm presuming that's because he didn't disclose it to them yeah the press release from ucla did include an absolutely incredible quote from ignaro who said that the research quote shows that

42:22supplements work well even in the absence of exercise what's good for mice is good for humans oh as science tells us om nom nom eat some cheese go live in the walls it's funny that like of these celebrity endorsements like david beckham is kind of like the most honest one you know when david beckham wears a shirt you're not like he takes herbal life you're like no they paid him money but this is like so much more insidious because especially with the researcher it's like when you speak as a nobel prize winner about cardiovascular health people assume you're speaking from science not from your fucking wallet i don't

42:55know man i heard dale earnhardt jr really likes palm olive no one fucking cares it's so much worse so according to fortune magazine this is around the time in the sort of mid 2000s when herbal life first starts taking on what it calls nutrition clubs okay that was a concept that first started in mexico with mexican distributors of herbal life the idea is that an herbal life distributor rents a storefront

43:27they charge a small admission fee five or ten dollars which gets you in the door and once you're in the door you get some drinks and snacks and herbal life shakes and herbal life products right the reason that they structure it that way do you want to say this is how they used to do uh raves is because you can't sell alcohol without a license you sell the map to the rave for like twenty dollars and then

43:58when you get there you get free alcohol if you're not technically selling it you're not in violation of the licensing i'm going to send you another quote from little bosses everywhere the clubs were not stores however legally they couldn't be operating as retail stores or shake shops would invite a whole host of regulations negating one of the very reasons multi-level marketing exists to avoid labor laws so the company developed a slate of counterintuitive rules for distributors operating nutrition clubs in commercial spaces they were not allowed to post signage anywhere that said herbal life or call

44:32themselves a shake or smoothie shop they couldn't have an open or closed sign the only clue a storefront was an herbal life operation was often its trim or facade painted in lime green the company's signature color they weren't even allowed to have windows or if they did they had to be covered distributors could not post prices or quote-unquote sell their products they were allowed to sell low-cost daily memberships for which customers got a shake or drink dude if you're selling products in this way you're like not a real company this is so fucking weird it's so bad if your products work and they're

45:05these miracle cures that you say they are then just fucking sell them normally the fact that you have to like go talk to a person and go through all this weird fucking rigmarole this is how timeshares get you too it's like you shouldn't have to sit through a fucking seminar to buy something it's like just sell me a thing if it has inherent worth you should just sell it to me normally i watched a documentary at one point uh about someone who had rented a storefront and signed a lease for his herbal life nutrition club and he was like i didn't realize that i was getting in at sort of the end

45:36of that trend yeah so he was like i sort of had two options i could either move into another kind of business that used that same storefront or i could find you know essentially like a rube to sort of pawn it off on and he was like i didn't feel great about that yeah so i just moved on to another business and now he sells vapes okay fair enough at least it's like a real business selling a real product right a real business with a real product where like you do actually have to tell people that

46:08there are health risks instead of just health benefits yeah totally so i'm like i honestly see how he got there and it's a weird position to be in where we're like cheering for someone moving it to vape sales you did it thank you sir yeah so the nutrition club initiative is especially concentrated in latino communities in the u.s uh yeah including among immigrants and monolingual spanish speakers yeah i was gonna say this earlier the these things oftentimes prey on kind of existing

46:41close networks like religious networks or like ethnic networks and that's another like element of the kind of predatory nature of them is that they're like exploding these like personal connections between people the last of their marketing tactics that we're going to talk about is arguably their most creative some of their distributors start buying up tv advertising time okay and advertising herbal life as a get rich quick scheme oh so i'm going to send you a little video clip dude this is

47:14going to bum me out so much one of the talk shows they was uh advertising this in home business it sounded pretty good listeners just like you are discovering how to earn quit your job type money right from their kitchen table the secret income at home.com of course i thought this would be a good opportunity it was being endorsed by sean hannity i believe it was sean hannity's program i thought there was some validity to it you know listeners just like you are discovering how to earn quit your job type of money right from the kitchen table we've been telling you about

47:45income at home.com when i watched the video that was the first time i heard herbal life this is a great business opportunity you have the opportunity for financial independence and freedom you can do it with helping people change their lives by getting them in a better nutritional mode by getting them healthier we're going to stop it there on a title card that says in 2011 johnson was the highest paid chief executive in the u.s and that's attributed to forbes think about his downline his downline is like thousands of people it's an astonishing downline we haven't even covered the sort of the

48:19the adjacency of right-wing politics to grifts yeah it's wild if you watch like fox news they're selling them fucking gold and shit so like this is straightforwardly wildly unethical yeah to just be like here's a tv ad if you do this thing you will be able to quit your job is one of your job money fuck no and frankly at this point in the company's development it's too far developed for anyone to make a real payday right again like you really only get the big paydays in multi-level marketing if

48:52you're one of the first in the door right if they're advertising on tv you're not one of the first in the fucking door yeah so in 2012 bill ackman of pershing square capital makes a public presentation that essentially makes the case against herbal life he makes a three-hour presentation that consists of over 330 slides all detailing why herbal life is a bad investment and why he believes they're in violation of the law my understanding is that bill ackman is like kind of a shithead as a

49:26person but also i love like a petty grievance just like brought to this level in addition to this presentation he does a ton of press around herbal life he goes on cnbc he goes on cnn he goes on c-span he was like i think this company is fake and it's going to like crater into oblivion right that's why i'm trying to short sell it yeah for folks who are unfamiliar essentially in a short sale if uh herbal life stock price dropped ackman would have made money buy high sell low right so if this guy who

50:01is sort of trying to ring the alarm about herbal life is also going to make millions and millions and millions of dollars if they fail it raises i think reasonable questions about to what degree he's raising the alarm for the good and to what degree he's doing that for some form of like market manipulation or personal profit right in the same way there's like a pump and dump scheme where you promote a stock and raise its price this is like a like a beflaccidding and dump scheme where it's like if you crater a stock you can make money on cratering the stock beflaccidding is just a

50:36terrible word what it's good they give awards for podcast hosts and then did this tank the stock price or was it relatively consistent during this time the stock price took a hit but again like the company just kept profiting it's like this is america just because this company is a scam doesn't mean the stock price is gonna fall or it's gonna go away and i'm proud to be an american the short answer here is that ackman's attempted short sale doesn't pay off for him but it does lead

51:07to a new wave of scrutiny around the company yeah this is what i heard about i had never heard of herbalife before this i was like why is everybody talking about this in 2013 the la times writes a piece called latinos crucial to herbalife's financial health herbalife acknowledged at the time that more than 60 of its product sales went to latinos in the u.s that's according to abc news in 2014 the new york times publishes a big piece about the sort of ackman thing

51:40in 2015 fortune magazine publishes the siege of herbalife is the name of the story okay and in 2016 betting on zero comes out and premieres at tribeca it is a documentary about herbalife and bill ackman's fight to take it down i love that we've managed to find a weight loss company that's like actually scammier than all the other weight loss companies in 2014 the ftc launched an investigation into herbalife and by 2016 they announced a settlement for 200 million dollars okay but

52:17again herbalife admits no wrongdoing right and they continue operating they continue operating although there are some conditions uh required by the ftc if they want to continue operating one is that they have to overhaul herbalife's compensation system for distributors sales to make sure that they're rewarding actual external sales rather than just distributors buying inventory right the ftc's public statement on this said quote to make sure everyone at herbalife is on board with the new setup

52:5180 of the company's net sales will have to be real sales to real buyers if that doesn't happen the rewards that high level distributors pocket will be cut it's so funny to be like by decree of the government of the united states you have to run a real business you have to sell a real fucking thing to real fucking people you have to sell a good or service to actual customers so that all happened in 2016 and 2017 in 2020 so they're still very much in the thick of that ftc settlement restructuring they

53:27still have their auditor on staff all of that is happening herbalife is hit with another penalty this time from the doj oh my god michael you may be worrying what does the doj have to do with absolutely any of this well here is a little recap from cnbc i was not wondering that at all okay uh authorities said herbalife schemed from 2007 to 2016 to bribe chinese officials with cash

53:58entertainment meals and travel to obtain direct selling licenses reduce government security and suppress negative coverage by state controlled media overseas corruption complaint correct china accounted for 19 percent of herbalife 4.49 billion dollars in net sales in 2016 up from 7 percent in 2006 regulatory filing show herbalife approved extensive and systematic corrupt payments to chinese officials while falsifying records to make the bribes appear as legitimate business expenses acting u.s attorney audrey strauss in manhattan said in a statement dude they were ordered to pay

54:35123 million dollars as a result of this one but their annual revenue at this point is still in below billions yeah god right so it's certainly a big price tag but it's far from what would be needed to just deal a death blow to the company they can afford it they pay it and they keep trucking along right also if they've gone from seven percent of their sales to 19 of their sales in china that in itself probably swamps numerous times over the size of this settlement so ultimately their investment paid

55:05off i tend to go pretty hard on regulation of diet and wellness companies as being like a thing that we need to do more of and i do stand by this but this is a story where regulation was pretty heavy yeah just failed to achieve anything good yeah right because their revenue is so great even when they take these kinds of hits in the public eye even when they take these kinds of hits in the press or in their stock price they are still making bank yeah we now live in a world where other multi-level

55:36marketing companies have seen what is possible right both from a profit perspective and from a regulation perspective and has seen that regulation is like not actually necessarily the end of your business right they'll still absolutely like make all kinds of noise about how terrible it is to be regulated but ultimately this is a real case of like you know cockroach survives the apocalypse kind of shit we're now at the culmination of like 40 fucking years of complaints and from day one within the first year yeah before they even made it into the wig factory they were already getting

56:14ftc complaints right what we're getting is minuscule fines and what we need is the government treating this company the way that me and my brother treated a blueberry bush you

56:54You