City Journal‘s Laura Vanderkam looks at the amazing and unlikely fad that swept much of North America until the wheels came off:
In the last few years of the twentieth century, speculative mania gripped seemingly normal Americans. People debated prices in online chat rooms. They devoured literature claiming that sound fundamentals, not froth, led to sky-high valuations. The frenzy grew and then, suddenly, the bubble burst. People lost everything.
This describes the dot-com crash, but it also describes a less-remembered mania for adorable plush toys known as Beanie Babies. In The Great Beanie Baby Bubble, journalist Zac Bissonnette blends the unlikely economics of an asset class encompassing Kiwi the Toucan and Happy the Hippo, and the unhappy tale of Ty Warner, the ruthless tycoon behind them, into a saga far more entertaining than a business book deserves to be.
Like many in the toy industry, it turns out, Warner had an unhappy childhood. His father abused his sister; his mentally ill mother would later steal Warner’s car. Perhaps to compensate, Warner developed an obsessive attachment to stuffed animals. After beginning his career as a salesman, he threw himself into getting the details of the animals he designed for his eponymous toy company right. The eyes in particular had to lock on a buyer. He once borrowed an employee’s pearl necklace to be sure the pearlescent color of a product’s fur was correct. He wanted all his toys to be worthy of bearing his name, “Ty,” on the ubiquitous heart-shaped tags.
From the beginning of his entrepreneurial journey, “his two biggest competitive advantages — obsessive attention to detail and trade-show charisma—outweighed his myriad disadvantages: lack of scale, no advertising budget, a small and not especially competent sales force, a limited product line, and little in the way of a track record with retailers,” Bissonnette writes. Warner would sell only to small stores — a declining market — because he never wanted to see his precious animals end up in a big-box discount bin. Yet the resulting difficulty this created for customers wound up adding to the mystique. People like a hunt. Fortune was kind to Warner for a while, and the limited availability, coupled with strategic “retirements” of desired Beanie Babies, boosted demand. A few collectors started re-selling rare Beanie Babies on eBay. As they made money and told their friends, a mania ensued.