In July of 1999, I traveled with my family to Tenby, Wales. The town is said to be picturesque, but I have no memory of its scenery—except for a small toy store we passed on our drive in. As soon as we settled into our hotel, my sister and I begged our father to trek to the shop and search for the Britannia Beanie Baby, sold exclusively in the United Kingdom. The Britannia bear wasn’t just a toy, we explained; it was an investment, projected to be worth thousands of dollars within a decade. Our father capitulated and bought us each a Britannia bear, which we dutifully kept in mint condition with the tag intact, reveling in its rarity while dreaming of the day it would be a hugely valuable collector’s item.
One month later, the company that developed Beanie Babies abruptly announced that it would stop producing the toys at the end of the year, both anticipating and precipitating the burst of the Beanie Babies bubble. Sellers panicked, buyers lost interest, and by the start of the new millennium, Beanie Babies had swung from an economic and cultural phenomenon to a tired punch line. Today, the Britannia Beanie Baby sells for $10 on eBay. My own Britannia lies buried in a box in the back of my closet along with hundreds of other Beanie Babies, where it has sat, untouched, for 15 years.
From this distance, it’s easy to laugh at Beanie Baby fever, to mock it as just another pointless fad in a chintzy, hollow decade. But in the latter part of the 1990s, Beanie Babies were so much more than a fad: They were a mania, an obsession that ensnared not just gullible children but also otherwise responsible adults who lost all sense of perspective over these plush playthings. People sold—and bought—some rare Beanie Babies for $5,000 each and expected others to skyrocket in value within a decade. (Collectors were careful to keep each toy’s tag attached and protected by a plastic case; a Beanie Baby’s worth was said to fall by 50 percent once the tag was removed.) Looking back, it’s clear that the Beanie Baby craze was an economic bubble, fueled by frenzied speculation and blatantly baseless optimism. Bubbles are quite common, but bubbles over toys are not. Why did America lose its mind over stuffed animals?
Zac Bissonnette’s new book The Great Beanie Baby Bubble does an excellent job explaining the basic economic factors behind Beanie Babies’ success. Ty Warner, the mastermind behind the toys, had a remarkable talent for manipulating supply and demand. (He’s also a borderline recluse and a profoundly troubled man; among other things, Warner repeatedly dated the same women as his father—at the same time—and became a plastic surgery addict.) First, Warner understuffed his toys so that they were flexible and “looked real,” in his words. Second, he sold only small batches of each new Beanie Baby to independent businesses, refusing to supply large quantities to big-box retailers and fixing the price of each toy at $5. Third, Warner “retired” every animal after a fairly short amount of time, introducing a new toy in its stead. This strategy created a near-hysteria each time a Beanie Baby was released, sending fans rushing out to local stores to buy the new toy before supplies disappeared forever.
All of this explains, in simple market terms, how Warner manipulated supply and demand to build a frenzy for his product. But Bissonnette’s book is disappointingly short on psychological explanations for why Americans were eager to shell out at least hundreds of millions of dollars for rather conventional toys. (The total spent on Beanie Babies is unclear because ever-secretive Warner refused to release his company’s earnings.) In one sardonic passage, Bissonnette cites Sigmund Freud’s belief that “the root of collecting” lies in “sex and toilet training,” as “the collector … directs his surplus libido into an inanimate object: a love of things.” Bissonnette also hypothesizes that collecting Beanie Babies “reflect[s] a regression to the soothing and comfort provided by objects during childhood,” and that the acquisition of a scarce, valued item activates our endorphins.
While Freudian theory hasn’t held up well to scientific analysis, some sort of mental disturbance might account for the more extreme cases of Beanie Baby addiction—like the retired soap opera star who lost his children’s six-figure college fund investing in the toys, or the man who committed murder over what a detective described as a “Beanie Baby deal gone bad.” But does it really explain what sent millions of Americans—soccer moms and CEOs, blue-collar workers and yuppies, Ph.D.s and high-school dropouts—utterly bonkers over a brand of plush stuffed animals?
A paper by David Tuckett and Richard Taffler, two economics professors with training in psychoanalytical theory, suggests Bissonnette’s conjecture isn’t that far off. Tuckett and Taffler specifically examine the dot-com bubble, but their theory applies to all modern bubbles. According to the economists, humans occasionally view exciting new creations as “phantastic objects,” which overwhelm us and skew our sense of reason. Our brains begin to tell us that by obtaining these “magical” objects, we will achieve some profound level of satisfaction—something akin to transcendence. The thrill of the chase then muffles our ability to rationally evaluate the actual worth of the object, and others’ willingness to go along with our fantasy reinforces our suspension of logic.
All this theorizing may sound like so much argle-bargle. But the meat of Tuckett and Taffler’s thesis builds on a famous theory of bubbles by renowned economist Charles Kindleberger. According to Kindleberger, every bubble has four basic stages: a grand new development that shocks the market; “euphoria” over that development; a sudden “boom” in sales and speculation; and, eventually, panic when the bubble bursts. Tuckett and Taffler approve of Kindleberger’s model, adding a coda—“revulsion”—to describe the collective hangover society experiences when it realizes it has invested in junk.
In the Kindleberger model (with the Tuckett/Taffler twist), Beanie Babies are a kind of magical object whose plush perfection captured the imagination of a small subset of early adopters. Soon Beanie Baby collectors sprang up to spread the toy’s transcendent joy, and then everybody needed each new Beanie Baby to complete his or her collection. But Warner limited the number of each animal produced, leading both buyers and sellers scrambling to purchase new releases and, in the process, wildly overvaluing their worth. Eventually, the fantasy faded—for most people, after all, Beanie Babies do not bring about nirvana—and the bubble burst. Buyers lost interest, sellers struggled to offload their surpluses, and the whole country felt rather gross about fixating on stuffed animals.
Andrew Odlyzko, a mathematician and bubble expert, proposes a simpler theory explaining speculative panics in his study on the British Railway Mania of the 1840s. Odlyzko credits Railway Mania in part to a “collective hallucination,” an extreme form of groupthink wherein a significant chunk of society feverishly buys into a shared dream with no regard for the skeptics and naysayers. (Some scholars think Jesus’ resurrection might have been an acute instance of collective hallucination.)
The existence of groupthink has been confirmed in a rich assortment of studies, and Odlyzko’s theory expands the idea to economic bubbles. Under his analysis, the initial coterie of Beanie Baby collectors comprised an in-group that shared the great secret of Beanie Babies’ worth. As more people discovered the toy, they yearned to learn this secret and partake in the impending financial success of the Beanie Babies market. Soon, millions of Americans were gripped by the conviction that they had discovered an easy path to personal wealth. And thanks to their collective hallucination of Beanie Babies’ worth, none of these collectors ever realized that the only thing driving the Beanie Babies market was their own conviction that the toys were valuable.
These theories may explain the mass delusions that enabled a large chunk of the country to believe that a $5 Beanie Baby could eventually be worth thousands. What they never quite get at, however, is that initial spark of fascination: how the ineffable appeal of Beanie Babies turned them, and not one of a thousand other 1990s trends, into a collective mania. That allure can probably never be quantified.
But those who once loved Beanie Babies may still remember it. I certainly do, because I remember when I got my very first Beanie Baby. I was 7 and had just woken up from adenoidectomy surgery to see a family friend through the anesthesia haze. She leaned over my bed and laid Bruno the Bull Terrier Dog by my head. I grabbed Bruno, closed my eyes as the room started spinning, and threw up. Bruno stayed with me through my convalescence, and long after I lost interest in Beanie Babies, he remained perched on my nightstand. There was something sweet and comforting and innocent about him, something so tender and gentle and warm. Bruno was the kind of toy Ty Warner was trying to make for children when he accidentally created a speculative mania for adults.
In 2013, Warner pleaded guilty to tax evasion after admitting to hiding millions of dollars in a Swiss bank account. He was sentenced to probation but may face years of prison time if the Justice Department’s appeal is successful. Bruno the Bull Terrier Dog now sits at the back of my closet with hundreds of other floppy, forlorn toys. Today he sells for 36 cents, with the tag still attached.