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Comment by nodesocket | Hacker News Reader

I am torn, on one hand Herbalife does smell of one gigantic pyramid scheme. Howerver, they have completely revamped the company and structure havent they? On the other hand, while Ackman is savvy and smart, his activist investor style rubs me the wrong way. He has unlimited capital, and thus that affords him the right to manipulate companies for his own gain? I don't like it. Also, let's not forget... If Herbalife eventually goes out of business, he stands to make a boatload of money. Ackman is not being altruistic.

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You do realize that traditional business is a form of pyramid scheme. Your boss probably gets more compensation than you do. He/she may have subordinate managers who themselves have subordinate managers who have non-manager employees.

The CEO makes bonuses based on performance of the company. The division managers makes bonuses based on their divisions' performance. The lowest people in the company probably make zero bonuses. And in many companies, the lowest paid workers were promised good future opportunities for growth in the company.

For every bad MLM (and there are many), I could probably identify 10 bad traditional companies.

Actually, you're describing a corporate pyramid structure, not a "Pyramid Scheme" which is: "a form of investment (illegal in the US and elsewhere) in which each paying participant recruits two further participants, with returns being given to early participants using money contributed by later ones."

MLM != Pyramid scheme.

Whether herbalife is the former or the latter is at the heart of the controversy around the company.

Having a hierarchy that gets narrower at the top, with people earning more, is not what makes something a pyramid scheme.

Having the earnings of the higher tier directly funded by financial contributions from the lower tiers is.

I lot of MLMs have a particular 'hiding in plain site deception'. The retail margins on the consumer goods aren't where the bulk of the top tier earnings are coming from. The conferences, training materials, tapes, courses and a raft of support systems for the distributors... all produced at very little cost are the true source. This is where the generous subsidies come from.

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