Betting on Zero (2016)
Director: Ted Braun
Cinematographer: Buddy Squires
Producer: Glen Zipper and Devin Adair
by Jon Cvack
I had first noticed Herbalife while hanging out at my favorite coffee shop over in Culver City as a representative pitched a handful of young woman, hardly out of high school; whose eyes were wide with dreams of wealth. I never knew anyone that had gotten involved, though my sister’s ex-high school boyfriend once fell victim to a similar scam involving steak knives (in which he had to buy a set to try and sell, though it was more about trying to get others to buy the set and try to sell; he didn’t last long).
The film opens up with “Activist Investor” and hedge fund billionaire Bill Ackman as he’s about to give a presentation in the long past stale Al Gore format where he stands on a stage and talks about the problem, which is then intercut with footage examining the rise and structure of Herbalife. For those not familiar, Herbalife is a health supplement company that recruits members to both 1) sell their product and 2) more lucratively (as they say), recruit additional members to sell their product. Similar to the steak knives, the individuals starting out are call "distributors" who have to buy about $3,000 worth of the supplements in order to start selling. They are restricted from setting up any of their shops with the name Herbalife or its logos on display anywhere outside or inside the store, also requiring that distributors who wish to set up shops to rent both the storefront and all the necessary materials. To earn above and beyond their supplement sales, the distributors are urged to recruit as many other people as possible. Naturally, most members they recruit fail, though not after they too had purchased thousands of dollars in supplies, with a small percentage then finding other to buy in. However, even if only two of a hundred distributors recruit two new members each, and those two recruit two more, at only two generations down at two people each, with 16 total members, the member pulls in $32000 worth of sales per month. The point is to find the right person to try and get those two yes’s out of a hundred.
Many people have been hurt by this business; that much is evident, and yet by the very fact that its CEO was attracted from Disney, and that thousands of people gather at these rallies to celebrate the cause, and that the documentary even has one young man who was very successful with the business, bringing in a six figure salary (though they did not at all go into why or how; the pivotal questions), proves that some people do, in fact, find succeed.
Where the ethics get complicated is when desperate new distributors target non-English speaking immigrants who're willing to pour their life savings into the business with dreams of wealth; taking advantage of the language barrier and failing to fully describe what the business is. Then again, you're left wondering if any of these immigrants might have succeeded and gained the life they sought.
The doc left me thinking about Los Angeles and the thousands of people who arrive in pursuit of entertainment. Most people starting here compete for any entry level position they can get, whether it’s paid or not, and it'll continue - legal or not - so long as the hungry supply is so drastically higher than the demand. One of the things most of us quickly learn is how many people are pursuing their dreams with equal degrees of passion. At the end of the day, there are not simply enough jobs for everyone.
I feel privileged to have even made a film, having found a job that allowed me to save and invest as much as I could back into my passion project, while supported by may friends, family members, and strangers. There are many people who have fantastic stories to tell and simply don’t have the resources to tell them. With a proliferation of media production college programs around the world and the low cost of decent equipment, there are thousands more now able to pursue the industry, and while with digital and social markets opening up new avenues, there are more people pursuing the few slots available in traditional television and film production than ever before. I wouldn't be surprised if the ratio of success in reaching the upper echelons of Hollywood are the same as Herbalife.
I imagine people who are struggling to get ahead might see Herbalife as their way out from a financially unfulfilling life. To have someone come up to you and say that you could become a millionaire. A good salesman will seem like your best friend, making it seem that if she could do it then you could do it too. So they head out to recruit and, like pursuing filmmaking specifically and finding the entry level job, most will say no and a handful will say yes. In a way, Herbalife reflects any competitive industry - not just entertainment, but politics, law, Wall Street, architecture, art, music, you name it. Think of all those who invest hundreds of thousands of dollars in education, time, or equipment, hoping to get into a highly competitive position. 90% won’t pursue it at all, of the 10% that do maybe half of them find a job, of that 5% maybe a tenth of them are positioned on a solid professional track (often based on resources or connections), and while I'm pulling this last number out of my ass (though it seems reasonable), maybe 1% actually make it into the upper echelons of their industries. They are mythological creatures. They are versions of Herbalife's Millionaire Club and President’s Team, who make it seem like you can get there too; never acknowledging the sheer amount of luck required.
At the end of the day, Herbalife remains a publicly traded company; people do make money off this business. It is a micro reflection of our general economy. Where it gets nasty is when they target those who don’t know any better; those who have no idea what type of scam this is.
Bill Ackman is what I’ve now heard a few times on NPR described as an “activist investor” which wants to short stocks (selling them to make a profit by betting on their failure), in the hopes of swaying the market to bring down the company. The guy looks like an asshole, epitomizing Wall Street sleaze with his expensive suits, perfect haircut, and condescending way of speaking to others. What makes him such a fascinating character is the fact that we don’t know if his predictions are right. Combatted by another hedge fund billionaire Carl Icahn, who believes that the stock is stable, if not posing chances for great returns (agreed by many other investors by the very nature of their preserving the stock), throughout the film I was left wondering who was right.
The primary issue is that the Herbalife’s model is well known at this point, and in an economy that runs on information, it seems difficult to assume that so many investors would be so fooled by the modest trading prices. Given the discussion above, it seems that aside from the exploited, many have at least a novice understanding of what they’re getting into and act accordingly, with most quitting and few pursuing, and a fraction of those able to make a living, and a fraction of those achieving the advertised wealth.
The immediate criticism is that Ackman simply wants to make himself and his clients rich through the short sell is rejected by Ackman in that he plans to donate all his profits. But that’s also a very specific set of words - he still has his client’s interest to consider (who do want to make money), along with wanting to avoid losing the billions he invested should the company continue its successful trajectory.
Up to the very end I found myself arguing back and forth. In the end, the SEC ruled in favor of numerous lawsuits and ordered that Herbalife was to restructure its model that I could accept Ackman’s cause. And yet, through further research, according to Fortune magazine, regardless of the controversy and the documentary, as of November 2018 the company saw a $700 million stock surge, with share price now at about $55, beyond the peak it reached in the film when Icahn was arguing in favor of Herbalife. It again leaves me on a cliff.
The documentary is not made all that well, excluding more favorable arguments and details that might provide a more balanced approach to the business model. As much as I was left wondering which side to fall on, my interpretation was based more on taking the information they provided and letting it bake for a few days, rather than because the filmmakers enlightened me. Surprisingly it was produced by the Academy Award winning producers of Undefeated (2011), so it wasn’t like this all came from nothing. It fails by trying to mask itself as objective, providing a center-anti-Herbalife slant when it could have been more interesting if they shifted straight to the middle.
BELOW: Ackman explains short selling and gives you a taste of his personality
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3/5/2020 08:35:26 am
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