February 28, 2015

Zac Bissonnette

Inside the Beanie Baby mania
Interview by
Zac Bissonnette’s latest book, The Great Beanie Baby Bubble: Mass Delusion and the Dark Side of Cute, is a fascinating cautionary tale about where financial hysteria can lead—and who gets hurt when a bubble abruptly pops.
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Zac Bissonnette’s first book, Debt-Free U, was published in 2010 when he was a 20-year-old senior at the University of Massachusetts Amherst. Since that very early start as a published author, he has gone on to write two more books (How to Be Richer, Smarter and Better-Looking Than Your Parents and Good Advice from Bad People) and served as a contributing writer for publications ranging from Time to The Wall Street Journal.

Bissonnette’s latest book, The Great Beanie Baby Bubble: Mass Delusion and the Dark Side of Cute, is a powerful cautionary tale about where a speculative craze can lead—and who gets hurt when the bubble pops.

 

Why did you decide to write this book?
I was in middle school when Beanie Babies were at their peak, and it was sort of my first introduction to the weirdness of speculative capitalism. My mother and I went to flea markets a lot and there was this one flea market that, overnight, became dominated by Beanie Baby dealers. I remember them wearing fanny packs and visors, talking excitedly about the rising values for the pieces they were hoarding.

That image stuck with me as I became more interested in business and the sort of behavioral side of things: why we make not-great decisions about money, which was very much at the core of my first two books (Debt-Free U and How to Be Richer. . .). Then, when I was in college, I saw a huge collection of perfectly preserved Beanie Babies sell for almost nothing at a local auction.

I went home and started to research Beanie Babies, and there were so many things about the craze that were immediately fascinating—mostly that it was so much bigger than I would have thought: 10 percent of eBay’s sales in the company’s early days came from Beanie Babies, and the creator of the animals, Ty Warner, became a billionaire and the richest man in the history of toys. Rare Beanie Babies sold for thousands of dollars, and a self-published book that predicted what each animal would be worth in the year 2008 sold more than three million copies. And then, in the early days of the millennium, the whole thing died and nearly all the Beanie Babies were instantly worthless. Ty Warner, meanwhile, celebrated by buying the Four Seasons Hotel in New York City, and by building a $150 million mansion in Montecito, California.

Everything about the story intrigued me and, much to the chagrin of everyone who knows me, Beanie Babies were pretty much the only thing I wanted to talk about for the two years I spent working on it.

 

"It began with a few extremely enthusiastic women in Chicago’s suburbs—smart, upper-middle-class women, including a doctor, a commodities trader and a teacher who, for strange reasons, just went absolutely nuts for Beanie Babies."

 

Can you briefly describe Ty Warner?
Brilliant, creative, meticulous, compulsive, devoted and charismatic, but also secretive and ruthless.

Almost everyone who knew him described him as paranoid and, while most people had tremendous respect for his gifts in terms of product design and marketing, his relationships, both personal and professional, tended to end badly. People who’ve worked there sometimes call him “The Steve Jobs of Plush”—and I think it’s a pretty good comparison. Unraveling the story of his strange life—including a lot of time talking with his sister, who is in her 60s and struggling with medical bills—was really interesting.

In your opinion, what was the secret to Warner’s success?
It really all started with the product. Beanie Babies happened without any advertising or distribution through big box stores. The craze took off through word of mouth—soccer moms seeing them in gift stores, and telling everyone about how incredible they were: thick fabrics and adorable designs at a five dollar price.

Talking to people who knew Warner in the early days, I was really impressed with his fanatical devotion to the product: the endless hours he’d spend poring through fabric samples, and the number of prototypes he’d go through for each animal before he got it to be exactly what he considered perfect. Even now, when he’s 70 years old and spectacularly rich, he’s still involved in the design of the animals—and spends a lot of time at the factories in China overseeing production.

For the first couple years of his company, back in the 1980s, he and his girlfriend personally trimmed and brushed every single animal before it was mailed to the retailer who’d ordered it. He was fanatical about the product; creating perfect stuffed animals was the driving force of his life. Everything that happened followed from that.

Where did the Beanie Baby craze begin?
As the song goes, they came in from the middle west and certainly impressed the population hereabouts.
 It began with a few extremely enthusiastic women in Chicago’s suburbs—smart, upper-middle-class women, including a doctor, a commodities trader and a teacher who, for strange reasons, just went  absolutely nuts for Beanie Babies.

As those first collectors tried to assemble complete collections, they started running up four-digit phone bills calling out-of-state gift shops in search of rare Beanie Babies. In the process, they became the force multipliers for the craze. When that small circle of early collectors had trouble finding the pieces that had been produced in really small quantities, they started to pay a lot of money for them—and the word of rising prices sparked further interest. Its viral spread began almost literally on a single cul-de-sac, but the early days of the Internet drove it into something unlike anything that had ever happened before. Ty was one of the first companies to use a website to really engage its consumers.

Which Beanie was worth the most money at the height of the craze? Why was it so desirable?
That would be Peanut the Royal Blue Elephant. She was desirable because she was so rare. Peanut was originally released in a royal blue color but after a few thousand had shipped, Ty changed the color to what he thought would be a more child-friendly baby blue; by 1998, the original Peanut was selling routinely for at least $4,000, and sometimes more for really mint condition examples.

The company changed the design of Beanie Babies pretty frequently and a lot of reporters and experts trying to understand the craze cited this as an example of Ty’s marketing genius. But, actually, it had nothing to do with that: It had to do with this insatiable quest for perfection. And so a piece would be out there and then he’d decide that he didn’t like the design and so he’d change it to try to make it cuter. That was the driving force of his life: creating the cutest stuffed animals. In a way that was entirely accidental, especially in the beginning, the changing of already released pieces made him the richest man in the history of toys.

 

“Do you think the ass on this one is too big?” Ty Warner asked a worker in his office.
“Ty, I’m an accountant,” the guy replied.

 

How many Beanie Babies do you think the serious collector had on hand in, say, 1997?
That’s the kind of information most large companies would have done extensive market research to find out about. But Ty never used focus groups or marketing consultants; his market research was to ask everyone he knew what they thought of the products—and then he’d assimilate that feedback from random people into his redesigns and new products. Someone who worked there described seeing Ty wandering the halls of the office with artist’s renderings of upcoming stuffed animals—and he once stopped one of his top finance executives and said “Do you think the ass on this one is too big?” “Ty, I’m an accountant,” the guy replied.

But from my own research, I would say that it was not at all uncommon for people to have hundreds of these animals—generally meticulously preserved. If you go on eBay and type in “Lot of Beanie Babies,” you can get a sense for how enormous the collections people built were.

What marked the beginning of the end of the Beanie Baby craze?
Really, it was inevitable: Speculative bubbles always end because they’re inherently irrational and they’re basically structured as pyramid schemes—even though they’re naturally occurring, and not necessarily the result of an evil scheme.

 In the case of Beanie Babies, the problems started when the production of the new pieces had increased by enough to satiate demand. At the end of 1998, Ty announced the retirement of a bunch of Beanie Babies—which was something that had always lend to a rush of buying and soaring values. Except that, for the first time with that December 1998 retirement, it didn’t happen. The Beanie Babies lingered on the shelves, retired but still available for five dollars each. It was the first crack in the notion that Beanie Babies were a good investment, and things got very painful for speculators pretty shortly thereafter.

What happened to most of the people who made it rich on the Beanie bubble?
It generally ended badly for them. Some of the early collectors who cashed in big because they’d hoarded the rarest pieces before they were worth a lot of money made hundreds of thousands of dollars—and then quickly lost the winnings in another big bubble that was happening right around the same time: Internet stocks.

A lot of the former salespeople at Ty—some of whom were making high-six figures per year in commissions after earning less than $30,000 per year two years earlier—remember having blown through the money pretty quickly because it never occurred to them that it wouldn’t last forever. Many of the dealers I talked to who made a ton of money in Beanie Babies ended up losing a lot of it on the inventory they got stuck with after the market fell apart in 1999 and early 2000. The big winner, of course, was Ty Warner.

What lessons do you hope readers will take away from this story?
It’s one of those things I never really thought about while writing the book—I really wanted to tell the story and capture this incredible thing that happened: how it happened and why it happened, and leave it to other people to ascertain what it all means.

To me though, the story of Beanie Babies and of Ty Warner is really about how wrong we can be about what has value.

Over 5,000 different Beanie animals exist today. Which one is your favorite?
It’s kind of like asking me to pick my favorite kid. But after several hours of thought and much prayer, I would say: Among the Beanie Babies, I think Kaleidoscope the Cat is one of the most exquisite and beautiful things I’ve ever seen. But for all of the plush animals Ty ever produced, Sugar, who is a big fluffy white cat, is my favorite. If you look up those two animals on eBay, I can almost guarantee you’ll find yourself buying them.

What was the strangest interview you did for this book and why?

There were so many. This was one of those projects where virtually everything about the reporting was at least tinged with weirdness—almost like the strangeness of the Beanie phenomenon had rubbed off at least a little on everyone involved in it.

But the strangest interview of all, I would have to say, was at a prison in West Virginia, where I spoke with a man who had, in 1999, murdered a coworker over a Beanie Baby debt. His first question to me before we got started: “So them Beanie Babies—are those still hot?”

 

Get the Book

The Great Beanie Baby Bubble

The Great Beanie Baby Bubble

By Zac Bissonnette
Portfolio
ISBN 9781591846024

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