Too Good to be True
During the early and mid 1800’s William Banting was the most sought-after undertaker in England. His Mortuary on St. James’s Street in London directed the funerals of the Royal family including the services for both King George III and the IV. His son and eventually his grandson would continue the Royal undertaking until 1928 when his grandson retired.
By 1865 William Banting was one of the most famous men in England, yet it had nothing to do with the Royal Funerals he conducted. His 1863 pamphlet, Letter on Corpulence, Addressed to the Public, had catapulted him to fame as the inventor of the new health craze named after him. “Banting” was the practice of reducing the amount of carbohydrates, particularly starchy carbs from the diet, to lose weight. This method of eating had caused him to lose a significant amount of body fat. It worked just as well for others, and soon people all over England were “Banting” in an attempt to lose unwanted pounds, thus making “Banting” the first known diet fad to take the world by storm.
Banting himself wanted no part of the profits from his booklet. He self-funded the printing expense of the first edition and donated all profits from later versions to charity.
While Banting was not seeking to profit from weight lose trends, most others are not so noble. The weight loss industry is big business in America. Every year we spend upwards of $60 billion to drop pounds. Those dollars are spent on everything from gym memberships to microwavable low-calorie meals. Half of that 60 billion is spent on various supplements, pills and powders that claim to help lose weight. They are marketed as fat burners, metabolism boosters, and appetite suppressants.
Whether or not those products work, is up for debate, but the fact is Americans can’t get enough of them. Losing weight is difficult. It involves eating less and exercising more. Both things that most people don’t want to do. If someone was truly able to develop a pill that reduced weight, or a drink that would take away your appetite, the profits would be endless.
Triglycerides are the energy yielding dietary fats we all know and love. They consist of three fatty acids bonded together to a backbone of glycerol. In 1968 chemists at Proctor and Gamble were toying with this chemistry in an effort to produce a fat that would be easier for premature babies to digest. In that effort, they failed. But when they replaced the glycerol backbone with sucrose, they discovered what they thought was the holy grail of weight loss supplements.
The liquid that resulted from the sucrose backed fatty acids looked just like vegetable oil. It tasted just like vegetable oil. It smelled just like vegetable oil. It even cooked just like vegetable oil. But whereas a tablespoon of vegetable oil contained 120 calories. A tablespoon of their liquid contained zero. The chemists had stumbled onto a calorie free oil substitute. When word got to P&G executives their eyes must have lit up with dollar signs.
It would wake almost 30 years for the product to go from a failed experiment to a final product, but in 1996, Olestra was approved for use as a food additive. Frito Lay was among the first brands to jump at the chance to produce fat free potato chips. In 1998 they launched the “WOW” line of chips, a fat free version of all of their classic favorites. Sales in the first year were over $400 million. A testament to the desire Americans have for the easy way to lose weight.
Olestra, for all of its benefit, was not without some side effects. Part of the 196 FDA approval included a mandatory labeling on any product containing Olestra, that it may cause unwanted effects on the gastrointestinal system. Olestra, along with eliminating all fats from a product, also negated the body’s ability to absorb essential vitamins and nutrients resulting in cramps, gas, and diarrhea.
What began as a revolution in low calorie snacks, quickly turned into the butt of late night tv jokes. Sales of WOW chips plummeted. Frito Lay would rebrand to Lays Light and continue to offer the products for another two decades, but sales never came close to the initial launch figures. Americans had been tempted into trying the snacks based on their low calorie, fat free claims. But the side effects taught them an important lesson. If something sounds too good to be true, it almost always is.
That one sentence will do more to keep your hard earned dollars safe, than perhaps any other. Financial fraud, like dieting, is big business in the US. And like diet pills, people fall for it because they forget that little phrase. Brokers promising consistent guaranteed returns. Online businesses offering quick and easy ways to create side income. The possibilities are endless.
We may look at those who “fell” for a scam as people who should have known better. They should have sensed something was off. But we have the benefit of hindsight. It’s as plain as day to us now that Bernie Madoff was running a ponzi scheme. But in 2002, he had thousands of clients. Many of them famous. He was running one of the largest legitimate market making firms on Wall Street. His private fund was by invitation only. It had almost 20 years of proven results. Almost everyone at the Palm Beach Country Club had invested. There were plenty of reasons to trust him.
But his promise of 15% annual returns was too good to be true. His claims that his investments had never lost money were too good to be true. The signals were there, and they were painfully obvious. His victims just forgot to stop and think. They forgot to ask themselves if it just sounded too good to be true.