SYSK's 12 Days of Christmas… Toys: Beanie Babies: Reigning Toy Craze Champion

0:00This is an iHeart Podcast. Guaranteed Human Hello again, guys. Up next on our playlist is our episode on Beanie Babies. They may have actually upstaged Cabbage Patch Kids because the craze for Beanie Babies stretched way beyond Christmas. There was a divorce case that saw the couple having to divide up their Beanie Babies on the floor of the courtroom. We talk about that, don't worry. Anyway, enjoy this episode on Beanie Babies.

0:31Welcome to Stuff You Should Know, a production of iHeartRadio.

0:41Hey, and welcome to the podcast. I'm Josh, and there's Chuck, and Jerry's here, too, and we're feeling fairly festive. And this is Stuff You Should Know. That's right. The episode before the Christmas episode. Yeah, which has become a, I guess, tradition to do a classic toy. When did we start that? I'd say more custom than tradition. All right. I'm sorry. It's not Christmas custom. I'm feeling contrary. It is definitely a tradition. Yeah, that's because you're about to shut it down for a month, so you don't care. You're burning bridges. Exactly. I won't see you until, like, 2024. Yeah, like, Chuck will forget anything that happens today by then.

1:25I'm trying to think of what our first toy one was. It was a handful of years ago. I don't remember, but it was. Slinky maybe? No. No, I mean, we've done toy ones, just not around Christmas. I'm trying to think of the first toy Christmassy one. I can't. I'm drawing a blank right now. So this is like high quality podcasting we're doing right now. Well, good pick this year. Yeah. Thanks. I don't know what made me think of Beanie Babies, but I did. and I think it turned out to be a good one too because it had nothing to do with Christmas really. Christmas pops up at one part but it's a toy and it's a really interesting toy because Beanie Babies, for those of you who don't know, if you were born after the 90s,

2:13were probably, well, I'll just say the Financial Times called it potentially the greatest market bubble of all times. Yeah. I mean, that's really saying something because there's been some market bubbles, but the Beanie Baby craze of the mid to late 90s probably topped them all. It was just that crazy. I mean, we've talked about some crazy stuff that people have done for toys before, people elbowing one another for a Cabbage Patch Kid. That's peanuts compared to what people did for Beanie Babies. Yeah, I didn't know anything about this either because that was sort of the end of college and then my New York, New Jersey years.

2:52And I just, I knew that Beanie Babies were a thing, but I was not participating in the economy in that way at that point. So you didn't own a single one? No, of course not. I didn't either. No, I totally didn't. But the thing is, is we were in the minority. In America, something like 62 or 63 percent owned at least one Beanie Baby at the height of this bubble. Think about that. Yeah, that honestly was one of the most shocking stats in this whole thing. Yeah, that's like 6.3 people out of every 10 people. Yeah, that's amazing when you're talking about a little kid's toy. Yeah, well, that was the thing.

3:32It wasn't kids that fueled this craze. It was almost exclusively adults because the reason a market bubble grew is because there became this idea that Beanie Babies were valuable, That they had an inherent value greater than the face value that you would pay for them at the retail store. Yeah, which was true for a while. Yeah, it was. It was. We'll get into all that. Let's start from the beginning, shall we? All right. Well, you can't talk Beanie Babies without talking about the gentleman who started it all. I do remember seeing the letters TY on Beanie Baby packaging. So I wasn't completely head in the sand.

4:14Sure. But I did not know that T.Y. was the guy's name. It was Ty Warner, who was born in the mid-1940s in LaGrange, Chicago suburb, LaGrange, Illinois. And he had a pretty not great childhood, it seems like. Is that fair to say? Yeah, from everything I've heard. Yeah, had a mother who suffered from mental illness, which was not treated, which is even worse. didn't have a great relationship with his dad. His parents got divorced when he was in his 30s, but he went to college at Kalamazoo, a college in Michigan, where he learned his love of treading the boards. Yeah. Yeah, Kalamazoo. That means theater.

4:57Right, exactly. But he did, he got into acting, and it kind of, either he was already like a theater kid at heart, or it turned him into a theater kid, because he ended up taking that, that way of living or that way of looking at the world or being in the world with him essentially for the rest of his life. Yeah, he seemed fairly flamboyant. He was flamboyant. There's a really oft-cited story about him showing up when he became a salesman for the toy company that his father worked for. He would show up to these sales calls in a Rolls Royce wearing a floor-length fur coat and a cane and a hat. Essentially like Kramer when he accidentally is wearing the Technicolor Dreamcoat and ends up with that big Jamiroquai hat and a cane.

5:47Yeah. That's essentially what Ty Warner showed up to these sales meetings looking like in the early 60s. And apparently it worked because he said that his premise was if he showed up to a sales meeting looking like that, people would say, I want to see what's in that guy's brief. case. Yeah. Or do you? Yeah. It depends on the kind of party you're in for. Yeah. He was a really good salesperson, apparently. He thought a lot of himself, though. And in 1980, he worked for this company, I guess, what, for like 18 years because he got the job in 1962. So that's a nice long run. But his, at least the way his former boss told it, a guy named Harold Nazemian, who was the CEO, basically accused him of moonlighting on the company and using their sales list and his personal relationships with people as a salesperson to sell his own stuff while he was working as a sales manager for this company.

6:51And so he got fired. Yeah, on those sales calls, he would be like, yeah, I've got these great Dakin products, but also I want to show you these too. So he was not only using company context, he was using company time, too. It's about as bad a thing you can do as a salesman, essentially. Yeah. And it wasn't long after that the Beanie Baby came along. No. That was, so it was 1980 when he lost the job. He apparently moved to Rome. He went to go visit some friends and ended up living there for a few years. And when he came back, he was inspired to keep going in the toy industry. I guess it kind of got under his skin.

7:29And he'd seen some toy cats there in Rome, he said. And he was inspired to create not Beanie Babies at first, but his first plush toys, which was a line of cats laying down, pretty fluffy. They looked, they were fully stuffed, which is a big difference between them and Beanie Babies. And then for every cat, there was a Himalayan version of it. And they were pretty cute little cats. But the thing that he did that I think really kind of helped sell these things, because they were like a modest success I've seen it described as, that he gave them names. They weren't just some stuffed cat. This was Smokey.

8:09This was Peaches. Like these cats were individuals. They had an identity, and that made them that much more lovable. Yeah, and they were larger. They were about 17 inches. Larger than Beanie Babies would be. They would cost more than Beanie Babies at$20. And like you said, they were stuffed, but not stuffed with the, you know, kind of genius of the – I don't know about genius. That's probably stretching that word. It's true. Let's just say the fairly smart thing that he did with Beanie Babies was he stuffed them with beads like a – what's it called? PVC pellets. Like a beanbag chair. Yeah, pretty much.

8:47And didn't overstuff it. So you could move them around and pose them, and they could, you know, droop over your shoulder and stuff like that. Not like a regular sort of fully stuffed, whatever they stuff those things with, whatever weird chemical stuffing. Oh, like the little styrofoam pellets? I don't know what's in those things. Styrofoam fiber? It's kind of like, yeah, fibers? Yeah, I mean, those were the cheapest ones that you would get as like a prize at an amusement park. Yes. That literal styrofoam balls. Right. And that was a big deal about his Beanie Babies because they were high quality.

9:26They were very well made. From the outset, he was all up the bottom of the South Korean manufacturers he had partnered with to make these things. He was really involved in the design and manufacturing process. So these were really high-quality dolls, but he made a very conscious decision to sell Beanie Babies at$5 a pop, which he said that kids could typically buy that with their allowance money. Because as we'll forget multiple times throughout this episode, these were originally meant for kids to buy, the Beanie Babies were. So that was a really big deal because he came out, he was one of the first people to come out with a high quality toy at a price point of something you would get at like the county fair or something as a prize.

10:12But instead it was a good quality plush toy. Yeah, exactly. And so this was 1993 for the actual launch of the Beanie Baby, which launched with Brownie the Bear. and Pinter's the lobster. And like a cabbage patch kid, it came with a date of birth. He used the name like he originally did with those fully stuffed cats or kitties. I guess fully stuffed cats sounds gross. It's like a turducken. Including the date of birth. And then also another key was this little short poem. And their little heart-shaped tag turned out to be a bit of marketing genius. It was just an extra little something to make it different to appeal to a kid.

10:55Because you got to, even if it ended up being a thing that adults try to collect because, you know, they thought it was valuable, it never would have gotten there if he hadn't have made a toy that kids really love to begin with. Right. Also, I mean, he wasn't the first to do that. This was a good 10 years after the Cabbage Patch kids and their adoption papers and all that stuff. But it's still, it is a good marketing technique for sure. And it did work. But the thing that made Beanie Babies really kind of take off was multifold. Part of it was his marketing scheme. He had a really brilliant idea, which was only certain kinds of stores could carry Beanie Babies.

11:36And you actually had to be a licensed Beanie Baby retailer to sell Beanie Babies legally or legitimately. And those stores were like Hallmark stores, locally owned gift stores, hospital gift shops, like small stores. So that right off the bat canceled any chance of anyone I saw described going into like a big box store, like a Walmart or something, and seeing a bargain bin of Beanie Babies just lumped together for 50 % off. No way. The fact that that possibility didn't exist, someone couldn't see that, automatically made it. They were just higher status than they otherwise would have been. Because he made enough to sell to huge retailers like that.

12:20He decided deliberately not to do that for that reason. Yeah, super smart. I mean, if you can create a scarcity and the illusion that what you're peddling is, like, limited and collectible, then you're going to do pretty well. And that's what he did. But not only by limiting the amount of stores that could be sold in, but he also limited the number of toys that these stores could even buy. Like that Hallmark store, once they, you know, really took off, couldn't be like, hey, we're going to dedicate half our store to these things now because they're selling, like, hotcakes. So he would dole them out in limited numbers to the stores, and each of those stores only had certain products.

13:03Like, you know, you might have Spot the Dog and Squealer the Pig at one store or Chocolate the Moose and Flash the Dolphin at another. And that creates a situation then where kids are like, oh, I got to, you know, like completing the collection is a classic kid's toy scam. For sure. Yeah, collect all the things. To get kids to buy all the things. Exactly. And so you would have to go around town to multiple stores in your town to get the ones that were available. And because they were allowed to only buy limited amounts, frequently those things were sold out. So the idea that these things were scarce collector's items was manufactured out of the gate by Ty Warner and his marketing scheme.

13:49I almost said scam, but scheme, I think, is a better way to put it. Yeah, the other big thing is that this coincided with the rise of the Internet. There's a great scene in the movie. There's a movie that's out now, I think an Apple original, called The Beanie Bubble. Yeah. I haven't seen it. Did you watch it? No, the reviews aren't kind. I may watch it because I love Zach Galifianakis, who plays Ty Warner, and Elizabeth Banks is in the movie as a sort of a thinly veiled version of his former business partner and romantic partner, I think, Patricia Roach. But in the movie, in the trailer I saw today, Zach said, because, you know, they started a website and they were, you know, an early website in those years.

14:37Yeah. Zach Galifant, or I guess Time Warner says, we broke the internet thing. That's awesome. Which I thought was a pretty good line because the internet was so new. over and was like, I guess, you know, this is a thing. Yeah, apparently. So he had an employee named Lena Trivedi and she was a coder. And this is like 1993, 94. And she convinced Ty Warner to create a Beanie Babies website because they were getting calls and letters and stuff like that from people saying like, this is my checklist. Is this accurate? Am I missing any? And they thought, well, let's just put like a central place where all of the Beanie Babies can be listed.

15:13And it It can be a place where everybody who likes Beanie Babies can come and, like, learn and get excited about Beanie Babies and buy Beanie Babies. Because starting in 1995, they started selling Beanie Babies on this website. And that was the same year that Amazon and eBay launched. So they were one of the first e-commerce sites on the Internet, too. Yeah, which is amazing. The movie has a character named Maya, who is, again, a thinly veiled version of Lena Trivedi, which I'm curious why they didn't just use their real names. They touted this as loosely based on Zach Bissonnette's book and that some of it was fictitious, I think, to keep from getting sued.

15:59I get the impression that Kai Warner is not shy about suing people. Well, which is interesting because he played Ty Warner in the movie. Like, that's the only name that wasn't changed. Yeah, I don't know why they did it, but they definitely did it. Well, judging from the trailer, it seems that both the Banks character and the Maya character are kind of one of the threads of the movies, as it was seemingly in real life, was that there were at least a couple of women in the organization that had a lot to do with their growth. And the sort of story is that he never gave them enough credit. And that seems to play out in the movie.

16:35Oh, yeah. He like if you read any like corporate write ups, like like press releases or the very rare interviews he's given. Like it sounds like the whole thing was just him. Just him. Yeah. And in part, it was largely him because he owned the company from the outset. Always has. He's never he's never sold one share. He didn't take it public. It's been a privately owned company by him. 100 % as far as I know from the outset. So he definitely, you know, really was the driving force in this. But he had help that is largely unacknowledged publicly. Yeah. It's a good thing that Zach Bissonette came along and also the people who made that movie based on Zach Bissonette's book to kind of shine a spotlight on the other people, particularly women who helped him.

17:24Yeah. Zach and Zach. That's right. The two Zacks on the Zack attack against Ty Warren. That's right. The other thing that he did to sort of, you know, drive this, I mean, I guess we can call it a false scarcity, is he was very secret about the company. He didn't want people outside the company knowing, like, when they were going to launch a new kind of toy, how many they were making. Right. In 1995, he started retiring models. That was huge. And then adding other ones, and he would just all of a sudden drop, like, you know, this Marty Moose. What did I call him? Something the moose. Chocolate moose.

18:02Chocolate moose is gone, let's say. And if there are beanie baby people out there, they're like, no, chocolate moose never left. I'm just using that as an example. That's a good idea. But they would just announce that on the website, and all of a sudden people are like, oh, my God, they've retired the moose. And, you know, people are driving around and trying to find them in those stores before they're all gone. Yeah, that was a deliberate thing to do as well to create further scarcity, like legitimate scarcity. But apparently he fell into that backwards or he stumbled into it because we said that he was really involved in the design.

18:37After these things would launch, he would like see one and be like, that's too orange. I want it more red. And all of a sudden I saw Pinchy the Lobster would be a much deeper red. Well, they'd stop producing the orangish red one. And Beanie Baby collectors would go bonkers trying to find the other one. He started to notice that. And so he created real scarcity by deliberately retiring some just out of the blue. People would go scramble to find them. And then retailers, most importantly, would start stockpiling everything that he had that they could sell, say, the orange pinchy. Yeah, he was also smart enough to realize that the Cabbage Patch Kids, when that bubble burst, it just kind of all went away.

19:23And so he would do things like, hey, Hallmark, if you want to order these Beanie Babies, you've got to also order some of this other stuff that I'm selling. It's not nearly as popular, but he tried to increase revenue sort of across the company so he wasn't all in on the Beanie Baby. Right. I say we take a break and come back and talk about how McDonald's factors into this. What do you think? Mcwhat? Yeah. Lately I've been learning some stuff about insomnia or alluminia. How about the one on borderline disorder? Better yet, birth order. Heard that one before, but it was so nice. I learned it twice.

20:06Hi, everybody, listen up. Oh, it's Charles and Joshua. It's stuff, it's stuff, it's stuff. You should know.

20:23Running stuff is fun with Josh and Chuck. Stuff you should know. Okay, Chuck, so we said McDonald's factors into this. Like any great American economic bubble story, McDonald's is going to play some role in it whatsoever, somehow, some way. And McDonald's is the one that basically said, if you are just kind of out there on the margins and don't really know what's going on in this Beanie Baby collector world, growing under your very nose, this McDonald's Happy Meal promotion is going to just blow the doors off of any illusions that Beanie Babies are not a cultural force to be reckoned with. Yeah, over a couple of years, I think they had two versions in 97 and 98, where there were hundreds of millions of teeny babies.

21:16These were even smaller, obviously, because it was, you know, to fit into a Happy Meal. Yeah, teeny beanies. Yeah, what'd I say? Teeny babies? It works, too. I like teeny babies. I like teeny babies, too. Teeny beanies. And, you know, even if your thing is already popular, all of a sudden, if hundreds of millions of these things are going out in Happy Meals and, you know, the most popular, you know, fast food restaurant chain in the world, then it's going to just skyrocket this thing even further. And that's exactly what it did. Yeah, the 1998 one, the second one that they did where you could get teeny beanies in a Happy Meal, the first weekend of that promotion, McDonald's saw the highest increase in sales in its corporate history.

22:01It had never sold more in any weekend in the history of McDonald's than it did at the beginning of that second Beanie Babies promotion. and people were ordering as many Happy Meals as they were allowed to order and telling the McDonald's workers, just keep the food. I just want the Beanie Babies. McDonald's had to set up rules, like individual franchises had their own rules. It was really patchwork where you could say get five Happy Meals per order or per visit and you had to have a two-hour waiting period in between visits. So people would just go from McDonald's to McDonald's and then just go on a circuit to get as many of the Beanie Babies as they possibly could.

22:39People were tackling like delivery people showing up with the boxes of the new Beanie Babies. It was nuts what people did just for the McDonald's version of the Beanie Babies. Yeah, that McDonald's record, that even counts passing the Great McRib Feast of 92, the previous record holder. The McRib's back right now, I saw. I've been meaning to go get one. Talk about false scarcity. Yeah, same thing, for sure. I mean, they could put that on their menu at any time, right? Totally, for sure. You know that the fat cats at McDonald's corporate are eating McRibs every day of the year. Yeah. The employee lounge is just stocked with them.

23:20Right. But all this that's going on, Chuck, underscores a larger cultural thing, and that is that people are buying these Beanie Babies not just because they think they're the cutest thing on two legs, but because it has become largely widely accepted that they are a sound investment if you want to diversify your portfolio or, more often was the case, make your entire portfolio just Beanie Babies. Yeah, you know, this was by the, like you said, the Cabbage Patch Kids had already come and gone. Everyone has already known at this point about, you know, Star Wars collectibles and baseball cards and trading cards.

24:02So the idea, I think there are certain people out there after all those things happened that are always sort of looking for that next thing as a, you know, sort of alternative investment. If I can, you know, buy 50 Beanie Babies and put them in a box and just sit on them and that'll put my kids through college one day. And that's, you know, a lot of people did stuff like that. I think you mentioned eBay had launched very soon afterward. They launched in 95. and in 1997, this is the other most staggering set of the show to me, 6 % of all of eBay was Beanie Baby sales. Yeah. Isn't that nuts? So the secondary market really did grow up, and there really was like a huge market for Beanie Babies that, say, had been retired, and one that you had bought for$5 and kept in the package, you could sell for hundreds of dollars on eBay legitimately in the mid to late 90s.

25:02Yeah. So this really was happening. Like it wasn't like everybody was just hoping beyond hope that their beanie babies were going to increase in value. They were increasing value before their very eyes. So people who weren't sucked into it were like, this is the dumbest thing I've ever seen. And if there's ever been an economic bubble, this is it. And yet people were buying these things for like long-term investing. They were buying them, hanging on to them for 20 years or 30 years from now. The people who were actually trading in the moment are the ones who might have made money off of it. But that's pretty much the only people who did.

25:41Yeah, for sure. It also created a sort of an industry around it. You found some examples of people that made a lot of money just in the ancillary beanie baby market by doing things like writing books about stuff. This woman, Peggy Gallagher, she was a paralegal. She made 200 grand on a book that she self-published called The Beanie Baby Phenomenon and then started making, I imagine, a pretty good deal of money as an official. Well, not official, but as just an experienced beanie authenticator. another woman named Mary Beth Soboluski. She was an IBM systems engineer, and she just made sort of the go-to list, like the Bible, basically, of Beanie Baby pricing and made a lot of money off that and also started putting out a magazine.

26:31Yeah. Like, was it a monthly? Yes, it was based around the price list. Like, did you ever collect or read Beckett's monthly for baseball cards? It's just a big price list. But I knew about it. Okay, it was basically that, but for Beanie Babies. It was called Mary Beth's Beanbag World. They sold 650 ,000 copies a month at its peak for six bucks a pop. So that's almost$3 million a run per issue. Yeah. That's amazing. For Beanie Babies price guides, right? But she really went to town with it. It wasn't, you know, just based on nothing. She and her assistants, like, called dealers, Beanie Baby dealers, to find out what their prices were, what was selling really fast.

27:09What you got? What you got? Right. They were following eBay prices like they were. It was a legitimate. Olivia put it was the gold standard price list for a reason. Yeah. You know, so and Mary Beth Soboluski is another woman who is often overlooked for the contributions she made to the Beanie Baby mania. Because in addition to creating the gold standard price list, she was one of the original self-described Chicago suburban soccer moms who started trading Beanie Babies in the first place. And apparently their fervor in trading Beanie Babies in suburban Chicago actually kicked off the national trend of collecting and trading Beanie Babies.