Live-Read: The Great Beanie Baby Bubble

NOTE: This was previously published on Patreon.

I'm reading The Great Beanie Baby Bubble because Elizabeth May recommended it on Twitter, and because my deep dive into the LuLaRoe documentaries and Multi-Level Marketing (MLM) schemes led me to this fascinating article by the wonderful Meg Conley about how her mother collected Beanie Babies and how we discuss things that women invest in (LuLaRoe, Beanie Babies) differently from how we discuss things that men invest in (crypto, dot com).

And/So/But, this guy who owns the company--Ty Warner--is already giving off Elon Musk vibes EXCEPT that he pairs over-the-top generosity with his, er, entrepreneur eccentricity. For example: as an end of year bonus after their record-breaking 1998 year, he gave Christmas bonuses to all his employees of a one year paycheck to them. Not one week, one YEAR. Note that the company at this point has about 250 employees, so these are mostly salespeople and a few overhead employees that handle payroll, accounting, and web design. We'll talk about the employment conditions of the overseas workers who are actually making the Beanie Babies later. [Editor's note: It's mentioned that at least one salesperson working on commissioned pay earned $800,000 that year, but it's unclear whether the bonus was of their base (pre-commission) salary or if it included commissions. I'm assuming the former.]

Ty also gave his employees a limited edition, made-only-for-them, #1 Bear.

A small red teddy bear with the number 1 on its chest.

I found this very touching, and was a little surprised to hear that the employees pretty quickly stuck them up on EBay for $5,000. I don't blame them, to be clear! But that makes me think that sentimental gifts from their boss maybe didn't have a lot of impact for some yet unknown reason. WE SHALL SEE.

Ominously: We're introduced to Ty Warner's long-term girlfriend Faith who he has been carefully not marrying. He's a billionaire and she has nothing, no stake in the company, despite the support she's been providing him. She sells the #1 Bear that he gifts her so she can have a secret "get out" fund if he dumps her without a cent. She's worried. I'm worried for her.

Ty started in toy shows selling Himalayan cat stuffies. He liked to pluck fur from around the eyes to maximize eye contact between the toy and the buyer. Humans do love them some eye contact. He made a quilt seller big money by convincing him to put cat stuffies ON the quilts; people ended up buying both. Not sure I'd put that connection together, but Kissmate says it's brilliant.

This is fascinating: no children are allowed at professional toy shows? I know that's standard for trade shows because people are there to buy wholesale and members of the public aren't really supposed to be wandering around, but I'm just surprised that NO kids at all are allowed because I would've thought there would be some 5 year old that each company brings as a market expert, lolsob. Like that kid in the 101 Dalmatians remake that plays games professionally and predicts if they'll sell.

...well, this just took a hard left turn: "Success aside, Warner’s relationship with his father was strained at best and, by most accounts, bizarre and dysfunctional. Ty and his father dated the same women on several occasions. “Dad really knew how to treat a woman,” Ty’s sister [Joy] remembers. She says that Ty was jealous of his father’s charms, and channeled that energy into seducing women his father had been with."

How do you...that seems...extremely unhealthy...? Okay!

Fascinating: Ty's early salesman experiences can basically be described as the world's best salesman but the world's worst person. Everyone, pretty much without exception, at the first toy company where he worked hated him. And he was a bad tipper to service people (of course he was). He once took a friend's 5 year old daughter out for ice cream in his Rolls Royce and insisted she buy her own ice cream. One presumes he has a different side of himself that he shows to the ladies because christ THIS GUY.

Ty eventually got himself fired, despite being an amazing salesman for Dakin Toys, because he tried to sell his own line of toys to his Dakin customer list and using your sales job to snipe customers is a no-no. However, Ty's dad was kind enough to drop dead of natural causes at this point and give Ty an inheritance of dubious value--Ty says 50k, others say 200k or more, and Ty is known to lie flagrantly about his finances and start-up challenges--that lets him re-jumpstart a new plushie business that he names after himself: Ty.

He flew to Korea and cold-knocked on factory doors until he found someone willing to make plushie samples for him to his designs and specifications. This was his first line of plushie: the Himalayan cats. I can't decide if they're adorable or terrifying.

Six small furry cat plushies in neutral creams and grays.

"They were indeed good cats. Prized collectors’ items that still occasionally sell for hundreds of dollars on eBay, the cats had thick hair, a light texture, and a certain floppiness that made them cuddlier than anything else on the market. And in a foreshadowing of future glory, there were beans in the buttocks and feet to provide weight and “poseability,” as Ty put it. “No one had put the combination of under-stuffed with beans. All the animals were stiff and hard,” Warner told People in 1996."

A clarification: By "under-stuffing" he doesn't mean underneath, like the under-carriage of a car. He means not stuffing the toy to its full potential, leaving some wiggle room to move the animal around. There had definitely been toys filled with "beans" (or small round plastic pellets in this case) before Ty came along, but his claim is that he was the first one to "under-stuff" the toy so that there was room to move and pose the toy. It is unclear whether he is right about being the first to do this: most of the triumphs he claims for himself are either outright false or arguable at best. The book does seem to agree that the under-stuffing was genuinely innovative.

However, I will note that Ty does seem to have had a real knack for understanding how people think: he used a huge logo sign to drive traffic to his small booth by understanding that people need obvious "meet-up" locations: "Their first show was in Chicago, and their space was six feet long—tiny, but money was tight and Warner had a plan to attract attention. He arrived hours before anyone else to set up his booth so that his venture’s sign, with the big heart logo, towered twenty feet in the air, dominating the auditorium and ensuring that his company would be the name on everyone’s lips. When groups arrived at the show, Roche remembers, the plan was obvious: “Meet me in forty-five minutes under that enormous ‘Ty’ sign.”"

Oh my gosh. I gotta admire the sales instinct: "Warner had a go-to move: picking up George, a baby gorilla that was among the company’s most popular offerings, placing it on the man’s chest, and saying, “I want you to look into his eyes and tell him you hate him.”" Although apparently the sales instinct doesn't extend to all his customers; Ty is apparently a drama king and a fatphobe: he turns over his own tables in front of customers if they aren't arranged to his satisfaction, and: "Warner was also vigilant about keeping overweight women away from his cats. “He was afraid they’d sweat on [them],” Roche remembers." Fuck you, Ty.

Ty was paranoid about industry espionage even as he engaged in rampant spy shenanigans of his own: "Ty Inc.’s 1989 catalog had this on the back cover: “WARNING: If anyone dare copy our creative designs or patents without written permission, ownership of your eternal soul passes to us and we have the right to negotiate the sale of said soul. Furthermore, our attorneys will see to it that life on Earth, as you know it, is not worth living.” Yet he also went into toy and gift stores almost every day in search of design inspiration. “You can’t reinvent the wheel!” he always told his employees."

More industry espionage: "Warner frequented a mall in Geneva, Illinois, where he bought pieces from Boyds, Russ, Gund, and Steiff. He carefully inspected the fabrics, tags, and stitching, and he dissected them in his office to learn how they were made. When he went to the factories in Asia, his carry-on bag often contained competitors’ products. He showed them to the factory owners and seamstresses, and spoke in clipped English with a twangy accent to describe his ideas for ribbon colors and how much distance there should be between the eyes on his cats."

Wow, his treatment of his designers was utterly despicable: "As his company grew, he offered them just a credit on the hangtag in exchange for the rights to their work. The credit helped drive demand for the designers’ upscale, handmade pieces—and gave Ty Inc. the cachet of being associated with “designers,” thereby making the company seem a little more high-end than other lines where a bear was just a bear. Ruth Fraser, a teddy bear designer who ran a Toronto gift shop, met Warner when he came into her store and wandered around with his hands behind his back, saying nothing, carefully examining every piece she had. Then he offered her $800 for one of her patterns. She made the deal and was later annoyed to discover that Warner had produced endless variations based on the design she’d sold him. Then Warner decided that he didn’t want the designers’ names on his pieces after all, and removed them peremptorily, leading to a lawsuit with one designer." He started to insist that he was the designer of every Ty toy, that he'd "designed everything" even though that was patently false.

It's starting to become clear why everyone who ever worked with Ty hated his guts: "Nasty comments about overweight people were a recurring theme with Warner. In restaurants he sometimes loudly remarked on the physical fitness of patrons at other tables. If his meal was too big for his liking, he’d send it back to the kitchen to be halved—with a lecture about how such portion sizes were making America the fattest country in the world. He also made a habit of entering a restaurant, sitting down, looking at a menu, blowing his nose on the napkin, and then announcing that he wanted to go somewhere else."

At the time, the toy industry would keep high-sellers in their lineup for years, and they'd only announce new products 1-2 times a year. But Mattel, struggling to revive their Hot Wheels line of toy cars, started a strategy called a "rolling mix" wherein new products would come in and old products would be retired without much warning. They invented a FOMO (fear of missing out) strategy for toys and Ty lapped it up. "The idea of the rolling mix was to change the assortment of each seventy-two-car display every two weeks. Instead of introducing all new products once or twice a year, Mattel rotated pieces in and out in a random and unpredictable way; collectors went into stores to check the displays more frequently, and there was a “ticking clock” incentive to buy new pieces because you never knew when they’d disappear from the rolling mix."

Ty also prioritized small businesses and airport shops where his plush would receive lush displays and impulse buys. Big box toy stores weren't attractive to him, because the cheap (but high quality!) plush toys took a backseat to the expensive techy toys. Again, a real understanding of human behavior: a busy man rushing home through an airport will pay $5 for a peace offering to his kids or wife. Ty had neither (and his parents by all accounts were very toxic), so I'm impressed by his insight into human behavior.

Ty has been building his business with his girlfriend Patricia Roche up to this point. When the company starts being successful and she makes $200,000 one year in commissions, he gets angry. He urges her to switch to a flat salary of $50,000 a year in 1992. She refuses and eventually has to leave him because he's--ah, here it is--physically and emotionally abusing her, as well as isolating her from her friends. Stellar. Great. Who would have guessed that the abusive guy who hates everyone and belittles his employees and violently turns over tables on his display floor would turn out to be abusive as a boyfriend????

[TW: Stalking]

Uh. Roche leaves the company because... This is a lot. She has a date with a guy--dinner and a weekend flight to Cancun--and Ty finds out about it. Ty follows her home and (apparently?) steals her passport in an attempt to stop the Cancun trip. She goes on her birth certificate instead. He then follows her to Cancun, knocks on their hotel door, pretends to be room service, barges his way in, and spends three hours refusing to leave while he tries to talk Roche into marrying him. Roche's date offers to leave and she begs him to stay, saying she's afraid of what Ty will do if they're alone. She leaves the company and goes into insurance. (She will eventually come back to work with Ty again, and I'm worried for her.)

Ty goes into therapy, gets a lot of plastic surgery, and acquires a younger redheaded girlfriend: Faith. “He stalked me for two years after we broke up,” Roche remembers. “Ty knew where I was morning, noon, and night.” He had concealed an audio recorder in her home and once, years later, played for her the tapes he had made of her with another man.

[TW: Financial Abuse]

Ty immediately makes Faith financially dependent on him and I am screaming in horror: "The questions about how she could help with his business came quickly—after he helped her get fired from her job. He told her that she was underpaid at $30,000 per year and that if she didn’t demand a doubling of her salary and a more prestigious title, he couldn’t be with her: “You let them take advantage of you, and I don’t want to be with someone like that,” he said. She took a stand, lost her job as a result, and, in a panic, called Warner in Korea. He told her not to worry, but when her unemployment ran out and she started to fall behind on bills, he wasn’t helpful. He advised her to cancel her cable-TV subscription. Finally, he told her to send him a tally of her monthly expenses and presented her with a check—for the exact amount, down to the penny—held in the arms of a stuffed bear, a combination of romance and exactitude that she thought was strange."

Please note that he is a millionaire at this time.

1993 marks the creation of the first Beanie Baby, Legs the Frog. Ty seriously understuffs it WAY more than is widely considered to be industry-appropriate at the time because he thinks this will make it fun for children to play with: the toy is designed to be thrown up in the air and PLOP on the ground, and to be poseable. The first line of Beanie Babies is supposed to be a sort of...stocking stuffer impulse buy that retailers can put by the registers. Ty is still selling his larger plush; the Babies are just one of his lines.

For the first year, nobody buys them. Retailers are worried that the thin pile (fur) and bright primary colors will make their stores look cheap and trashy, and they are afraid that if people can buy cheap $5 bears then they won't buy the bigger and more expensive toys. Ty refuses to fold the line and doggedly keeps adding designs; he is certain that kids will like these toys if people will just buy them.

The turning point comes... well, this is a bit confusing. Ty sells a stuffie called "Lovie the Lamb" that may be a Beanie Baby or may not be. The book isn't clear on this point and Google isn't helping because apparently there were at least TWO Ty stuffies that went by that name, and one was a Beanie Baby and one was not. Anyway, this lamb sold like hotcakes in hospital gift shops. I totally understand that; I panic-bought a little yellow chick of the Palm Pals line of bean-filled stuffies the last time Kissmate was in surgery. And lambs are great for newborns and for newly delivered mothers.

Problem: Lovie the Lamb has been unintentionally discontinued because there's a manufacturing issue with her fur overseas. Customers are upset. Retailers are angry. A trio of brothers who sold Ty merchandise to the public recycled an old idea they'd seen from another toy creator who did limited runs of his products: instead of saying that Lovie has been "discontinued", they told people she'd been "retired". For some reason this worked to soothe feelings, I presume because Mattel had also broken the ground of toy retirement.

These brother-retailers then go on to suggest that people buy up more Ty toys *just in case* other stuffies get retired. "“Let’s just tell people Lovie’s been retired,” one of the King brothers suggested, and that’s what they did after lunch. It worked: customers who were upset by the idea of a discontinued Lovie were intrigued by the prospect of a retired Lovie. Retailers who were pissed off if you told them you were discontinuing a piece they wanted out of necessity were delighted if you told them you were doing it on purpose. A few buyers asked the King brothers whether other pieces were going to be retired. The brothers said they weren’t sure—but suggested that it might not be a bad idea to stock up just in case."

The brothers pass along this strategy to Ty, who was intrigued. His first lines of Beanie Babies had sold poorly so if they were "retired" now, the secondary market wouldn't be immediately saturated with product (the way it would be if the toys had sold like hotcakes). Faith claims that the idea that the Beanie Babies were an investment was their idea, but the book author isn't convinced that this was a master plan except in retrospect. "“Most importantly, we would plant the seed in consumers’ minds that the Beanies they could buy on the primary market for $5 would be retired and immediately take on a higher value on the secondary market,” Faith McGowan remembered in her unpublished memoir. This assessment, however, overstates the depth of planning that went into the retirement idea; for the time being, retiring Beanie Babies was a random marketing stunt that came with no costs and few expectations."

Ty continues to steal ideas and I hate him. "At a family dinner at a local restaurant in early 1995, Ty mused on his desire to create a ghost Beanie—but said he couldn’t figure out how to do it because ghosts don’t have legs and he hadn’t done one without legs before. [Faith's daughter] Jenna, then in elementary school, drew her idea for a ghost on the paper tablecloth, and Warner was impressed. He tore it off and put it in his wallet. Within a few months Spook the Ghost was ready to ship—with “Designed by Jenna Boldebuck” on the hangtag. Two months later, Warner changed his mind and removed her name from the tag and changed Spook to Spooky. Jenna was hurt by it, and Faith was puzzled: Was Ty’s self-esteem really so fragile that giving a designer credit to his girlfriend’s school-age daughter was a problem? But it worked in everyone’s favor: once Beanie Babies got hot, a Spook with Jenna’s name on the hangtag was instantly one of the most highly sought variations, and collectors paid as much as $1,000 for mint-condition examples. A couple of years later, Faith McGowan suggested creating a Princess Diana bear to raise money for her memorial fund, and Ty dismissed it outright—only to announce it later that night as his own idea. “I sat there stunned but not surprised,” McGowan remembered. “At that point, all good ideas were Ty’s, regardless of who first suggested them. The idea for Beanie birthdays, Beanie poems, the Beanie Web site, and even the retirement of Beanies, had all originated with other people. One thing you can say for Ty: when he recognized a good idea, he got it done. But he also took ownership of it.”"

...Huh! So. Okay. Interestingly, it's the retailers and consumers that really turn BBs into a collector's item. It starts with some already-prone-to-collecting parents who just really really want to Catch Em All. Then the mom-and-pop retailers (in Chicago! Hi!) start making special shelves for the retired BBs, noting that those are special and limited edition and going to be worth something someday. One retailer compiles a checklist of BBs, knowing that collectors are driven to fill out checklists for those sweet sweet completion endorphins.

As BBs are taking off, Ty rehires his ex-girlfriend Roche to run the UK side of his business. This will only end well.

Now the BBs are really taking off because of retailers and consumers, and their footwork on the ground: "“My downfall was the checklists,” one early collector told me. “Once you have a checklist, you don’t look at what you have. You look at what you don’t have.”" At first the Chicago women are just collecting because they want to Catch Them All. But as more people are like "that sounds fun and cute, can you pick up some for me?" they start seeing a secondary market. They buy cheaply, sell for a profit, share (brag) about their profits as naturally one does, and more people suddenly want in on this "easy" business.

They're calling around the country, and then to other countries, looking for the early lines of BBs that have been retired. Then profit: "Among her finds: 30 Chilly the Polar Bears purchased for the equivalent of $7 each; within a year and a half, those sold for more than $1,800 each. Her 36 Peking the Pandas were worth around $2,000 each; the 84 Old Face Teddies were worth $1,800 each; the 36 Trap the Mouse Beanies, $1,200 each; and 12 Patti the Platypuses, $800 each." (The Old Face / New Face teddies are because Ty tweaked the face models on the bears early on.)

Two teddy bears. The one on the left has a narrow face, the one on the right has a full fat face.

Word of mouth around the country spreads that these stuffies must be hot commodities! Retailers are experiencing women calling them up and buying their entire stock!! (It's the same women each time. But they don't know that.) New collectors spring up, wanting to get in on this apparently profitable market! These new collectors haven't been following the BBs from the start, though, so NOW there's a market for (drum roll) pricing sheets. After all, if you're a new collector standing in a Hallmark shop in the mall, holding a...idk...Thorny the Rosebush plushie in your hands, you need to know if that's rare or not! Should you buy 1 or 100!!??

A woman named Peggy Gallagher creates a list of all the Beanie Babies ever and how much each one is currently worth. "Admittedly, her research left something to be desired; as Gallagher explained it to me, she was essentially making up prices based on the pieces that seemed to be the hardest to find.....In the beginning she simply decreed that most retired Beanie Babies were worth $10 or $20 each, and then watched in amazement as the market went there. Gallagher, with her own collection, naturally had a strong incentive to be optimistic about her estimates. Among the small group of Chicago suburbs collectors, the price lists that Gallagher—and then the two Beckys—put out became the market." So now, just to be clear, you have people paying $50 for, like, Rogue the Bat or whatever because some lady in Chicago *says* it's worth $50.

This is SURREAL. Like, on the one hand I guess we can all be like "yes, that is how speculative investing works sometimes" but also WHAT THE SWEET PUMPKIN SPICE FLAVORED HELL. "“All the people who were driving this lived within ten miles of each other,” remembers Mary Beth Sobolewski. Anyone who was collecting Beanie Babies in early 1996 was either in the Chicago suburbs or connected with someone in the Chicago suburbs who told them about the booming trade in collectible plush." I DID NOT KNOW THIS WHEN WE MOVED HERE.

Not only were they all in Chicago, they were all basically in the same neighborhood. "Also on that same block lived Joni Blackman—the People magazine reporter who did the first national story on Beanie Babies after Phillips told her about them. The world of early collectors hoarding the rarest pieces was indeed a tiny one, and all of the major collectors can be traced back to the cul-de-sac where Becky Phillips lived, not far from Mary Beth, Peggy, and Paula."

At this point is where we see the sales explode into high prices. New investors learn about the weird "rare" pieces like Peanut the Royal Blue Elephant and that Ty is a fussy perfectionist who is famous for tinkering with a product line and changing the animals' colors. Everyone starts buying NEW Beanie Babies as soon as they come out, on the off chance that Ty might change the pattern and you would have an overnight rare collectible on your hands. But! This is an impossible dream that cannot happen at this stage of production because the Chinese companies that Ty is ordering from are making 8 or 9 thousand of a pattern per day. Peanut the Royal Blue Elephant and his ilk were from smaller runs when the line wasn't successful. But Ty is very careful not to advertise how many BBs are being made. The company sells in small batches to lots and lots of small stores, which creates an illusion of scarcity. See also: LuLaRoe leggings!

The news media recklessly reports that people are making millions on BBs, even when some of their sources seem sketchy. Who wants to pull a fun puff piece about stuffies, even if some of the people interviewed are untruthful and attention seeking? Where's the harm? Gallagher (the woman who publishes the pricing sheets that are setting the secondary market prices) self-publishes a book of Beanie Baby pictures and appears regularly on a Chicago radio talk show advising that BBs are just like the commodities market or the stock market, with natural highs and lows. Invest now! Chicago teachers work BBs into their lesson plans. Mothers defend this by saying that the little poems on the heart tags teach the children to read, and that they "get to learn about toy retiring".

Ty is happy enough for the amazing boost in sales (up tenfold from the previous year!) but regards the collectors with some, uh, skepticism. "Because Ty wasn’t providing any information, Becky Phillips and Becky Estenssoro had taken the lead as Beanie Baby historians, sorting through thousands of Beanies and photographing the hangtags to try to trace the history of the line. They categorized the tags into different “generations” based on when Ty had used which designs. Their efforts helped turn the hangtags into cult objects: the key to determining how early a piece was and, once the counterfeiting started, whether it was authentic. They tried to drop off a copy of their book, Beanie Mania, one of the first guides to collecting, at Ty Inc., but Warner’s secretary wouldn’t let them into the office. Warner thought the women were “totally nuts,” as one former employee puts it."

Ty's obsessive attention to detail helped him manipulate the market to clear out inventory and keep investors frantic: "If he saw that an animal was stacking up unsold, he’d announce its retirement to clear out inventory and keep the dream of ever-rising prices alive. He later hit on another strategy: by retiring pieces that were already hard to find, you could drive collectors really nuts, and get them thinking that no Beanie was safe and that all Beanies must be accumulated as quickly as possible as soon as they were available."

Huh. Given Ty's terrible treatment of service workers, I genuinely did not see THIS coming: "And years before there was media attention to the problem, he was obsessed with the living and working conditions of the workers at the Chinese factories that manufactured Ty’s products. He always made sure they were paid above-market wages—and he was especially concerned with making sure they had enough light." I guess this ties in ultimately with his desire that the Ty name be synonymous with quality product: you can't really produce the highest quality products in low-light conditions.

Ty had in his employ a young woman named Lina Trivedi. Fearless in that "I'm an hourly employee with nothing to lose" sort of way, she bluntly told Ty her real opinion when he'd ask employees about the toys (Ty is, by all accounts, obsessive about asking people their opinions and taking it all onboard in an effort to attain perfection) and rose up the corporate chain. Lina was the one who created the BBs birthdays and poems, noting that the blank To/From tags were boring. She also, crucially, suggested a website.

In 1996, only 10% of Americans were online. The other toy companies didn't even HAVE customer-facing websites. Lina shrewdly wanted to create a site that fans would visit every day, multiple times a day, to stoke the collector craze. "One of Trivdei’s first creations was the Info Beanie; every month, users voted for which Beanie Baby they wanted to be their source of information. Trivedi would then upload a post every few hours with updates written in the voice of that animal: vague gossip about what was going on at Ty, allusions to new product lines, and hints about when retirements might be coming and which Beanie Babies might be affected." This meant that loyal site visitors got a heads up on retired BBs before the official announcement, and drove up online trading.

I genuinely had not realized how important Beanie Babies were to the growth and adoption of eBay?? Apparently early eBay was very dependent upon collectors and memorabilia, even as they struggled to land more 'respectable' trade merchandise like car parts for their listings: "It would be an exaggeration to say that eBay was built on Beanie Babies, but not by much....It turned out that Beanie Babies, which were gaining popularity just as [eBay] was, were the ideal product to sell through an online auction. Auction theory teaches that auctions are not, in fact, an efficient way of selling most goods. They are too labor intensive and time consuming for items that are likely to sell at a price the parties could have anticipated in advance. But auctions excel when they are called on to set prices for items whose value is inherently indeterminate....Beanie Babies, whose value rose and fell daily based on popular whim, could take full advantage of the dynamic pricing mechanism that auctions provided." (Ah! This explains why we use auctions for art and estate sales.)

People overbid on the BBs because people are primed to overbid at auctions, particularly if they've never bid at an auction before: "The role of auction fever in the rise of Beanie Babies can’t be ignored. Business school professors have been writing for decades about the tendency of people to overpay at auctions, and the effect is thought to be most profound in novices. eBay brought millions of people into the world of auctions for the first time—and the combination of the newness of the Internet and the newness of bidding probably contributed to irrationality." EBay met with Ty once, proposing an eBay branded Beanie Baby. Ty threw them out and threatened to sue them for having a "beanie" category, which was his trademarked term. EBay renamed it "Beanbag Plush" and avoided Ty after that.

The news reported breathlessly on the eBay sales, suggesting that people were getting rich on BBs, but really it was mostly collectors trading the same $30 back and forth, bolstering their collections against an imagined future cash out (that would never come). "Just as relatively minor discoveries of gold had fueled the gold rush of 1849, it only took $500,000 per month in eBay sales to help drive, at Beanie Babies’ height, $200 million per month in retail sales."

Meanwhile, Ty is carefully limiting retailers to 36 orders of BB style. He knew that if the market seemed to be saturated--if EVERYONE could easily buy a Spook the Ghost--then the craze would die down. Customers are frenzied. They bribe delivery drivers to tell them when stock is coming in. Retailers open the boxes on the floor and the customers buy everything in minutes. The retailers are pleased with the sales but the customers aren't buying anything ELSE. Just Beanie Babies.

It's 1998. The Ty company has to remove the Ty heart from their shipping boxes because customers are breaking into warehouses and stalking shipping trucks. "“If you were shipping diamonds, would you put a picture of a diamond on the box?” says one former executive. “That’s what it was.”" The Ty salespeople are frustrated because they're making millions of dollars of sales to retailers, and in theory they're making huge bank in commissions, but they don't actually get paid that money unless the goods SHIP and Ty keeps throttling production in order to stoke the customer frenzy. (It's becoming more clear why they didn't keep the sentimental #1 Bears!!)

The author speculates that Beanie Babies made collecting accessible at a lower price point: "Ty’s retirements and scarcity allowed the acquisition of $5 beanbags to activate the same endorphins that people chasing rare books and fine art thrive on—but at an initially negligible cost and without any immediate need for specialized knowledge."

Warner is at this point incredibly litigious, "suing more than thirty companies per year on top of the hundred-plus cease-and-desist letters his lawyers were sending each month to competitors manufacturing anything that resembled a Beanie Baby." The book author interviews a judge who presided over many of the cases: "“They were litigating very aggressively, and they brought a large number of lawsuits,” he told me by phone. “I can understand their aggressive strategy because this is a simple product to make, so it’s very difficult to fend off competition....Their basic strategy seemed to be to try to obtain exclusive rights over the term ‘Beanie.’” Was there any legitimacy to the idea that Ty owned the word? “We didn’t think so,” said Judge Posner, chuckling. Internal memos introduced as evidence found Warner himself referring to other companies’ products by this name: “We want to emphasize our Beanies are not just any Beanies—But special. Set us apart from our competitors’ Beanies,” he’d written. Other memos from trade shows, written by Ty employees, included references to competitors’ products as “beanies”: “They had beanies’ [sic] that were similar in look, but fabric was inexpensive and it looked like a cheap knockoff of [our] product.” How, Posner asked in a ruling, could Ty Inc. really claim that the term wasn’t generic when its own documents revealed that Warner himself was using it generically?"

The lawsuits were probably unnecessary; the collectors who were driving the Beanie Baby craze were working off of lists, not looks, and no other beanbag plush took off the way BBs did. Ty stumbles by suing a Christian company that makes "HolyBears" and collectors start to sour a little, complaining that they don't want to be associated with a company that goes around suing people willy-nilly. Collectors now start to grumble about limited run bears like the patriot-themed bear (Glory) being so rare that they can't find one for under $100.

"All speculative manias rely on self-proclaimed and media-anointed soothsayers for amplification, and Beanie Babies were no different. The craze never could have inflated as much as it did without the implied credibility that came from the books, magazines, and charismatic prognosticators extolling the toys’ investment value. Internet stocks had Henry Blodget, and Beanie Babies had scores of would-be experts promoting the line as a retirement strategy. The relationship between price guides and values is reflexive, antiques experts tell me. Each drives the other in a market-making cycle. Between 1997 and 1999, books about Beanie Babies were more popular than books about Y2K."

The price guides, as we've previously seen, end up setting the prices rather than just reporting on them: "The bubble in baseball cards came a decade before the Beanie craze. In the book Mint Condition, journalist Dave Jamieson, himself a former collector, explains the impact of the price guides put out by Beckett Publications, a publisher of popular baseball card price guides founded by statistics professor James Beckett. “What none of us understood at the time, however,” he writes, “was that Beckett’s guides were probably creating prices just as much as they were reporting them.” In a copyright infringement lawsuit Beckett filed against a competitor, a judge noted that “it is entirely possible that the prices in [his] publication not only reflect market prices, but in fact can determine market prices.” The Beanie price guides and the prices they were reporting contributed to an upward-spiraling feedback loop that benefited publishers, dealers, and most of all, the manufacturer."

Ty, of course, sues several price guide publishers before eventually partnering with a few "official" ones. He was possibly afraid that the price guides might show if/when the craze started slowing, but the price guides were naturally inclined to show prices increases: "after a market crash, no one is interested in buying a price guide that tells them their stuff is worth less than it was last year. Robert L. Miller, who published price guides for the collectible Hummel figurines for decades, solved that problem by simply raising his value estimates by 10 percent every year."

A husband and wife team take three weeks to learn about BBs from scratch and write a book about them as an investment guide. Almost everything in the book is made up by them and wrong, but: "The Beanie Baby Handbook sold more than one million copies in its first year and was a mainstay on the New York Times best-seller list—an ├╝ber-rarity for a self-published book, especially back then. It also appeared on the harder-to-crack USA Today best-seller list, spending fifty-five weeks there and peaking at number three—an astonishing accomplishment for a collector’s guide on a list that included all books of every genre, including perennials. It hit number one on the Publishers Weekly list and was selling twenty thousand copies per week at Barnes & Noble. It was the fastest-selling collectibles book ever, and one of the best-selling self-published books of all time."

Ah, here we gooooo! McDonald's headquarters were about five minutes from Ty headquarters. "Warner wanted in [on licensing]; at least he thought he did. Edstrom met with five top television studios and returned, delighted, with an offer from each one. Then Warner pulled the plug on the whole idea. He’d grown concerned that fleshing out the Beanie Babies into fully developed characters with personalities and voices would hurt the ability of children to interact creatively with them. He also worried that it would alienate the independent toy retailers who frowned on overly commercialized products. Virtually all toys were sold on television—and Warner liked the idea of Beanie Babies being special and staying special, something apart from the rest of the industry. Edstrom’s two-year tenure at Ty consisted almost entirely of saying no. Every month, hundreds of phone calls came in from companies wanting to license the Beanie Babies brand. Mattel CEO Jill Barad called personally to see about making a deal to package Beanie Babies to be sold with Barbie dolls; Warner wouldn’t take the call. Ty turned down repeated calls from Steven Spielberg’s office seeking to use Beanie Babies in movies. He turned down deals for breakfast cereal, apparel, children’s books, and pretty much every other consumer good for which you could possibly imagine a marketing tie-in with a Beanie Baby—and a bunch that you couldn’t imagine, including perfume."

But McDonald's offered the ability to transcend class barriers. "Still, Warner knew that McDonald’s could offer him something no one else could. As hot as they were, Beanie Babies were primarily a phenomenon of middle- and upper-middle-class suburban women. McDonald’s could get the Ty logo in front of lower-income consumers who never set foot inside specialty stores and drive them to the gift shops in search of the larger Babies, which were made with better fabric than any Happy Meal giveaway would be and came in more varieties."

McDonald's plans a promotion: "Expectations were enormous. McDonald’s reported production of one hundred million Teenie Beanie Babies, enough to fill the largest Happy Meal order in history. [...] That should have warned consumers that these were unlikely to be scarce enough to appreciate in value, but it didn’t. Warner had complained to McDonald’s that their production plans would be insufficient, but McDonald’s insisted that, either way, its restaurants were simply not staffed to hand out more Happy Meals than that."

The fateful day arrives and McDonald's ends up getting hammered by customers: "On April 11, 1997, the first Teenie Beanies landed at McDonald’s stores nationwide. “We’re getting fifteen to twenty, sometimes twenty-five calls every half hour since six o’clock this morning: ‘Do you have the Beanie Babies? Which ones do you have? What time are you going to start selling them?’” the franchise owner of a McDonald’s in Elmhurst, Illinois, told CNN. Some customers ordered a hundred Happy Meals and asked the cashier to keep the food. Stores received hundreds of calls per hour and set up automated recordings for anyone who called. “Good morning. McDonald’s. We have the moose and the lamb,” one Ohio franchisee instructed employees to answer the phone."

McDonald's has to pull out of the deal because they're legitimately afraid of the customers: "Two weeks into a planned five-week promotion, McDonald’s took out ads to apologize and announce that it was ending the giveaway early because it had run out of product. As for the TV commercials promoting Teenie Beanies, the company canceled those after just a couple of days, worried that massive crowds were putting employees’ safety in jeopardy. “The stores were just devastated by it,” one former executive remembers. “It really created a frenzy. The customers become deranged.” McDonald’s employees were given pins that read “I survived the attack of the Teenie Beanie Babies.”"

Even though the Teenie Beanies shouldn't have been worth anything on the secondary market, they were *because almost nobody was selling*. Everyone was so sure that the BBs would be worth even MORE in the future that they didn't want to sell NOW: "Miraculous as it was, the speculators were proven right. In the short term, at least, one hundred million pieces was a limited-enough edition to leave anyone who’d spent two weeks staking out drive-throughs with a tidy profit. The hoarding was driving up prices. Everyone thought their values would keep rising, so there were too few sellers to accommodate the buyers."

Meanwhile, McDonald's absolutely did bring new eyeballs and new customers to the BB craze, but since Ty is now at a point where he simply *can't* easily increase production without decreasing quality and decreasing the all-important scarcity driving the collecting craze, the new customers brought in my McDonald's weren't really helping Ty Warner: "The McDonald’s promotion brought massive mainstream buzz to a product with distribution only outside the mainstream. It’s a combination that hardly ever happens, and it amplified an already enormous imbalance between demand and supply—the equivalent of buying Super Bowl ads to promote a church bake sale."

The situation is starting to sour. Ty alienates his workforce with things like reducing sales commissions from 10% to 6% and driving away his web guru. A woman who had been using BBs to counsel children whose parents had died from cancer, and who picked them NOT because of the hype but because they were soft and hand-sized, has to stop: "When the eight-week programs came to an end and each child had a chance to bring home a Beanie Baby, they arrived for the last meeting armed with instructions. “My mom told me to make sure I take Squealer the Pig because it’s going to be worth a lot of money,” a boy might tell her—and then another kid would explain that he had received the same instructions from his father. Arguments about Beanie Babies shattered the therapeutic atmosphere that Beanie Babies had once been central to creating. “The parents,” Biank says, “actually ruined the whole thing.” As popular as Beanie Babies were, Biank had to stop using them for therapy. These particular stuffed animals were now too valuable to be given to children whose parents were dying of cancer. It had gone from cute to heinous, and there was no good way for it to end."

The tipping point comes as 1999 rolls in. Ty retires a slew of BBs and they just...don't...go up in value. This is because eBay has effectively made the paper pricing lists obsolete: you can SEE how much Barney the Dinosaur is worth by seeing the listings, rather than just believing he's worth $50 because someone published a guide saying so. Also: Pokemon debuted in the US in August 1998. By 1999, that's what US children are playing with. BBs are now entirely a collector item at this stage, untouched by children. (This is when the infamous Las Vegas Beanie Baby Divorce occurs, creating the famous photo of the two adults sitting on the floor in court trying to divide up their collection.)

A man and a woman kneel on the floor in front of a pile of stuffies and sort through them.

Ty can't release more volume of Beanie Babies without hurting the craze, but he seems to think maybe he can release more versions of BBs in order to capitalize on all these new customers. "At midnight on January 1, 1999, Ty released twenty-four new Beanie Babies—the largest product introduction in the company’s history. It was a mistake. Collectors of all things tend to be focused on building complete sets, and as the size of the Ty product line became unmanageably large, collectors were discouraged. With twenty-four new releases at an average retail price of around $5 each, Ty was asking enthusiasts to come up with $120."

Within months, collectors are in a state of panic as they sense the market collapsing: "In the September 1999 issue of her magazine, Sobolewski followed up with, “Ty Warner, if you are listening, there is one thing that collectors want to tell you. There are simply too many Beanie Babies on store shelves everywhere!” Collectors had previously lamented shortages and price gouging, but now, desperate to keep the craze going and maintain the value of the collections they’d already built, they were demanding that Warner curb production to stoke demand."

At this point, Ty is seeing the writing on the wall that BBs are winding down. He begins to diversify his assets: "While his sales force was pushing retailers for orders to diversify away from Beanie Babies, Warner was also diversifying his assets. On March 16, 1999, he acquired the Four Seasons Hotel in New York City for $275 million and started to retreat from his day-to-day role at Ty Inc. to manage an $86 million renovation. By that point, Warner was unwilling to listen to anyone about anything, Faith McGowan recalls. Faith suggested that he might want to find someone who could teach him the basics of the hotel business, and Ty responded with hostility. He owned a hotel, and that made him an expert."

Collectors have ideas about how to extend the BB market, but Ty is done. He designs a final bear ("The End", black with a fireworks design on its chest) and tells Roche and Faith that he's ending the BBs and starting a new line of Beanie Kids dolls. When Roche protests that the dolls are ugly and people won't buy them, Ty refuses to listen. He doesn't listen to anyone anymore, his success having gone to his head. "When anyone disagreed with him, his response was: “Who’s the billionaire here? I am!”"

Ty makes the announcement that BBs are ending around the same time he breaks up with Faith and gives her a measly $6 million house after she helped him make billions. The announcement that BBs are ending causes two contradictory impulses: the last BB (The End) instantly sells out because everyone expects it to be valuable, but something like 50% of collectors start panic-selling their collections.

Retailers are not buying up the ugly new Beanie Kids and Ty starts to worry that maybe he's made a mistake. He decides to let people vote on whether or not to bring the BBs back, and then to launch a Millennium Bear to restart the line in the year 2000. Everyone tells him this vote-to-bring-the-Beanies-back plan is a bad idea that stinks of desperation and cheap publicity stunting, but he doesn't listen.

Ty goes through with his terrible plan to let the public vote to bring back the BBs and it is so many layers of surreal: "Warner announced a forty-eight-hour period during which people could call in and pay fifty cents to vote on whether Beanie Babies should be continued, with the proceeds going to the Elizabeth Glaser Pediatric AIDS Foundation—although the question of what kind of psycho would spend fifty cents to vote to discontinue a stuffed animal was left unanswered. Predictably, in a vote that ended on January 2, 2000, at 6:00 a.m. Central Time, 91 percent of the reported 209,763 votes cast went in favor of more Beanie Babies. Ty Inc. announced that it would contribute three times the amount raised by voters to the charity. McGowan says that the actual number of votes cast was closer to one-tenth the number Warner reported and that the whole stunt was a flop."

Collectors say that the BBs died the day Ty announced the end, but don't really understand that the announcement only marked an end that was already coming. They insist that the BBs would've continued on as a cash cow investment forever if Ty hadn't shut everything down. Ty doggedly goes on introducing new BBs in 2000, including a colorful new Chinese zodiac line, but nothing takes off. People have walked away. The company see a huge plunge in revenue. Their strategy of mistreating stores--because what are they gonna do, NOT buy Beanie Babies--comes home to roost as many stores refuse to stock their new lines. I can't imagine many designers want to work with the company at this point either, given how shabbily the BB designers were treated.

Ty sinks his money into hotels. His plush employees lose most of their profits: "Ty’s sales reps who became millionaires mostly blew through the money on cars, boats, and Internet stocks—profiting from a bubble while oblivious to its inability to last. In the nearly fifteen years since the craze ended, few have come close to the incomes they achieved then. “I look at most people now, and I think we had a hard time landing on our feet afterwards,” remembers one former Ty salesperson who, at her peak in her midtwenties, earned more than $500,000 in a single year."

The aftermath chapters are sad.

Faith lives comfortably, but seemingly keeps pining for Ty to come back to her. Oh. Faith died suddenly in 2013. Her daughters seem to be mostly estranged from Ty now. "A week after the funeral, he invited Lauren and Jenna to his Oak Brook home for lunch. “You know,” he said. “I should have married your mother.” “Don’t you ever say that again!” Lauren screamed at him. Warner apologized. His sister, Joy, posted this comment on the obituary the funeral home posted: “Faith, I was so lucky to have met you and your beautiful daughters. Ty knows you were the best thing in his life. I’m so sorry he threw all of you away. But now his time is coming...”"

Roche is more resigned: "The hardest part of having a relationship with Warner end, Patricia Roche once told me, “is realizing that he didn’t care about you—not even a little bit.” McGowan, Roche says, had never recognized that her relationship with Warner hadn’t been the fairy tale she’d once thought it was."

Ty gets hit by the IRS for tax evasion.

WELP, I FOUND OUT WHY HIS SISTER DOESN'T LIKE HIM: "Faith McGowan had made vague reference to the [illegal overseas] account when I spoke with her, suggesting that it had been part of Warner’s contingency plan—if things in the United States were to somehow go bust with all his hotel deals, he had squirreled away $100 million in judgment-proof wealth in Europe. When I called Joy Warner to talk about it, the sixty-four-year-old was on lunch break at her landscaping job. The account had been opened in 1996—the year, Joy remembers, that Ty had reneged on his promise to build her a $100,000 house because, he said, he couldn’t afford it."

The comments on the trial are amazing: "(When I mentioned that he’d cried to Patricia Roche, she said, “Did the jury stand up and applaud his performance?” On Twitter, @philvettel joked that while tearfully pleading guilty, “[Warner] also announced the release of Blubber, the repentant whale.”)"

Ty gradually alienates and cuts off every person in his life, professional and otherwise. The head of the failing Canadian division was cut off after a lifetime of what he considered to be a close friendship. Roche, heading Ty UK which had now become Ty Europe, is cut off after 20 years of close professional partnership and romantic entanglement.

In a sad ironic fate, eBay who had once been so reliant on collectors now accidentally ruined the collector market: "The implosion of Beanie Babies and the rise of eBay brought the broader collectibles industry to its knees. Many of the collectibles market’s former stars say that eBay was responsible for its demise. “Ten years earlier, it was difficult to connect with people and find pieces,” remembers Dean Griff, the artist behind the Charming Tails figurines that were popular in the late 1990s. “There was a perceived value because it was so hard to find that piece. But then people could go on eBay and find five hundred of that piece. That’s what killed it.”"

I find it fascinating, though not surprising, that the ability to share information across a global market drives collectible prices down. No longer are you competing with a local market of "nobody else in the area has this doll, so I can set my price"; you're now competing against everyone on earth who has the doll (or who claims to have the doll) for sale.

Warner gets a light sentence from his sentencing judge because he gave millions to charity; the US government is appealing the light sentence for more jail time saying that the millions he gave to charity are less than 2% of his current worth and that the charity gifts are therefore hardly noteworthy! "Columnists and bloggers, especially in Chicago, mocked the sentence. Writing in the Chicago Sun-Times, Mark Brown explained that “to fulfill his community service, Kocoras ordered Warner to work with three Chicago schools where the billionaire says he can organize a curriculum to teach students how to manufacture and sell a product such as a school mascot modeled after his Beanie Baby success. That’s cool, and maybe on the side, he could help them put on a school play. I’d recommend the 1959 musical, ‘Never Steal Anything Small,’ starring Jimmy Cagney. These are my favorite lyrics: ‘Steal $100 and they put you in stir; Steal $100 million they address you as sir.’”"

Warner thrives at his community service with Chicago high schoolers, teaching them about product lines and helping them to design a line of clothes for their school. He seems to really enjoy working with kids, so that's nice. It's so weird for me to be "near" a story for once. Then the author interviews a father-daughter pair who are obsessed with all things Ty and are planning a Ty Warner Museum with a tribute McDonald's. It's a really surreal chapter that has to be read to properly experience it.

The one benefit to all this is that there are now a lot of cheap toys available to children who need them: "The speculative boom for Beanie Babies has resulted in an unsurpassed volume of high-quality, perfectly preserved, monetarily worthless plush animals for children most in need of the comfort of something soft."

As for Ty, he has no official will and no estate planning: "Unless Ty Warner suddenly gets interested in his estate planning, his mostly estranged younger sister, now sixty-five years old and relying on aid to the indigent for medical bills and part-time jobs to feed her half-dozen adopted animals, will be the sole heir to the largest fortune in the history of stuffed animals."

That's the end of the book! It was fascinating and horrifying!


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