August 14, 2018

The Great Beanie Baby Bubble (Mass Delusion and the Dark Side of Cute)

Here's the vocabulary list for The Great Beanie Baby Bubble (Mass Delusion and the Dark Side of Cute) by Zac Bissonnette.

ISBN 978-1-59184-602-4
Bissonnette, Zac. The Great Beanie Baby Bubble (Mass Delusion and the Dark Side of Cute). Penguin, 2015.

Representative Quotes

"That the speculative bubble in Beanie Babies took place in tandem with the Internet bubble suggests that the cultural forces that were alchemizing Internet stocks had the same effect on Beanie Babies. They rose in an era of unreality defined by magical thinking; as economist Dr. Robert Shiller writes in Irrational Exuberance: 'Speculative market expansions have often been associated with popular perceptions that the future is brighter or less uncertain than it was in the past.' They also, Shiller notes, have a way of clustering around century turns - as if the prospect of going from '99 to '00 is so fantastic as to make all things seem possible. In the new millennium, the residents of America's high culture thought, the Internet would change everything, making everyone who bought Internet stocks rich, no matter how much they paid. Those in the lower culture adapted that optimism to a belief in the investment potential of stuffed animals, and it's hard to say which view was proven more wrong." (p. 6)

"The collectibles business preyed on all the behavioral fallacies that cost investors money: our overreliance on past performance as a predictor of future returns, our tendency to have an inflated concept of the value of things we own (known as the endowment effect), and our tendency toward movement in herds." (p. 72)

"When I look back, the one thing I remember so much about Beanie Babies was how they made people feel so warm and fuzzy inside.... Then it just became people who saw dollar signs - that was by far the majority of it at the height." (p. 73)

"Gernady... was the first retailer to produce a checklist of all the Beanies he knew of, current and retired.... Give a person who is genetically hardwired for collecting a checklist and he'll attempt to buy everything on it." (p. 78) "My downfall was the checklists.... Once you have a checklist, you don't look at what you have. You look at what you don't have." (p. 89)

"The rise of teddy bears paralleled the rise of industrialization and the rise of the child as a person seen as worthy of pampering. Between 1880 and 1910, the percentage of the American labor force that worked in farming fell from 49 percent to 31 percent, and as the population moved away from the realities of life with animals, it romanticized them in its children's toys." (p. 80)

"Once people could buy them for $5 and flip them for two to five times as much, the speed of the fad's spread multiplied - because humans have an insatiable need to brag. The idea of making money reselling stuffed animals was so bizarre - so fantastic - that everyone who did it told everyone they knew about it. Even with relatively tiny volume, stories about profits on Beanies spread word virally of an otherwise unremarkable product." (p. 91)

" 'If other people start collecting, your collection increases in value.' While consumer goods have always gained popularity through word of mouth, word of a profitable investment always spreads more quickly." (p. 93)

"[Gallagher] was essentially making up prices based on the pieces that seemed to be the hardest to find. She tried to cull values based on what Gernady was charging and what the collectors in America Online's collectibles chat room were saying, but there was no transparent market yet. 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." (p. 94)

"In the tulip mania of the 1630s, the Semper Augustus bulb was the rarest and most coveted - and helped to spread the burgeoning market for tulips to its sad and inevitable conclusion: naive newcomers paid too much for tulips that weren't even a little bit rare. Just as the legitimate business model of eBay drove demand for shares of hundreds of other Internet stocks without business models, it was the discovery of hard-to-find oddities that started to turn harmless toy collecting into something truly insane." (p. 96)

"So now beanie Babies are big business, with grown men and women fighting over them and paying thousands of dollars for certain rare models, such as Peanut the Royal Blue Elephant (not to be confused with Peanut the LIGHT Blue Elephant, which only a total loser would pay thousands of dollars for)." (Dave Barry, p. 97)

"The self-styled market experts stoked the idea that in the new Beanies there was the possibility of finding examples that would experience the same appreciation patterns the earlier ones had. The reasoning was of course flawed: by the time Beanie Babies had caught on, the Chinese factories were pumping them out in huge quantities - although the diffused distribution masked just how many Ty was selling.... Warner knew that keeping small numbers of Beanies in many stores was the key to the crazy, telling a reporter in 1996, 'This thing could grow and be around for many years just as long as I don't take the easy road and sell it to a mass merchant who's going to put it in bins.' " (p. 98-99)

"Had the initial sales of Beanie Babies been stronger, it's unlikely that a crazy could ever have developed. There would have been no oddities and limited-production rarities for collectors to hunt for - and for which to pay the high prices that would spread word of an investment opportunity. As the Chicago Tribune reported, 'Start taking about Beanies, and just about everybody knows somebody who financed a wedding, a vacation, a new van or what have you with the proceeds of Beanie sales.' In his 1978 book, Manias, Panics and Crashes, the economist Charles Kindleberger explained the self-perpetuating feeding frenzy that develops when speculators start making money: 'There is nothing so disturbing to one's well-being and judgment as to see a friend get rich.' " (p. 99)

"The idea of people making money with Beanie Babies was too good for fact-checking.... It is perhaps no coincidence that 'the history of speculative bubbles begins roughly with the advent of newspapers. Although the news media - newspapers, magazines, and broadcast media, along with their new outlets on the Internet - present themselves as detached observers of market events, they are themselves an integral part of these events.... The media actively shape public attention and categories of thought, and they create an environment within which the speculative market events we see are played out,'  writes Dr. Shiller." (p. 100)

"In the days of the Internet bubble, a sexy story was often more important than a viable business model. When eBay was looking to raise venture capital money - and later on preparing for its IPO - its dependence on collectors led to eye-rolling among investors and analysts. How could a Web site that was mostly used to help people buy and sell vintage lunch boxes and Beanie Babies possibly be worth $1 billion? As the stock price rose, investors asked whether a company could really sustain a $5 billion valuation with 10 percent of its sales tied to collectors swapping Beanie Babies? Did that mean the market was valuing eBay's business selling Beanie Babies at $500 million?" (p. 123)

"The monthly sales of Beanie Babies on eBay constituted about 0.04 percent of the Beanie Babies Ty was shipping each month. But the prices they were fetching on eBay helped drive sales volume by a huge multiplier. People who had collections could go online and see that they were in the money, which made stocking up on more retail-priced Beanies an easy decision. The media was full of stories about people flipping Beanie Babies for a profit - but most people were not flipping them for a profit. Most people were hoarding them for long-term investment.

"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.... 'People don't think in terms of information. They think in terms of narratives.' The stories of people buying $5 Beanie Babies and then selling them to pay for cars spread of the word of Beanie Babies more efficiently than any deliberate marketing strategy could have." (p. 127)

"My daughter who is ten thinks I am addicted.... Yes, we are behind on our house payment, and I beg my husband to buy me 'oh, just one'... My fifteen year old son has cerebral palsy. I tell myself that he can use the proceeds from these Beanies to help himself maintain a decent lifestyle after I am gone." (p. 141)

"There were a few people who became millionaires in less than two years by spreading the idea that never, under any circumstances, ever, should anyone let a child touch a Beanie Baby. Beanies, they said, were destined for greater things." (p. 141)

"First some new thing comes along and captures the public's imagination. Then everyone starts making money. After that, some person of average intelligence is held up as a genius." (p. 142)

"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." (p. 143)

"When Ty Inc. won on summary judgment in a case against one obscure publisher, it was awarded all the profits - an astonishing $1.36 million plus more than $200,000 in interest on a few low-budget, poorly researched exploitation books that were not even close to being among the most popular of the Beanie guides. It is often said of the gold rush that the people who got rich were the shovel dealers who profited from the greed of the forty-niners. With Beanie Babies, most of the lasting personal fortunes came from selling books and tag protectors, not from speculating in plush." (p. 144)

"The mavens and publishers, even if they weren't themselves Beanie dealers, had powerful incentives to keep prices high.... 'A price guide is only valuable as long as you can raise prices. The premise of selling second-, third-, and fourth-edition price guides is to show people how much more valuable their stuff has become.' Just as business news viewership tanks 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 figures for decades, solved that problem by simply raising his value estimates by 10 percent every year....

Every current Beanie Baby available for retail for $5 was projected to be worth at least $40 by 2007. Fox bought virtually all the Beanie Babies he used for the photos from Peggy Gallagher, paying her, by his own admission, inflated prices and then using those prices as the basis for his valuations. 'It was obscene what I was charging him.... He didn't really care about the actual true pricing. He cared more about selling a gazillion books.

" 'It's our own personal 'theory of scarcity' that at least 90% of almost everything gets lost, stolen or destroyed within 10 years,' the Foxes explain in the book. 'Why should Beanies defy the laws of human natures? The point is, only a tiny percentage of Beanies will be sealed in Zip-Loc bags and treated with TLC until the year 2007, no matter how well-intentioned their owners... Whoever is lucky (and smart) enough to hang on to some top grade Beanie Babies for the long haul will be the future supplier for tomorrow's collectors.

" 'If this hobby continues to grow, as we believe it will, 10 years from now even today's 'shocking' high prices may seem low.... After all, people were shocked when Picasso's paintings surpassed the million-dollar mark. Recently one sold for $25 million.'

"The Foxes also provided 'estimates' of how many of each Beanie Baby had been produced, but those guesses turned out to be woefully low - as evidenced by the size of the fortune Warner had accumulated by the time the market crashed. However, the estimates did provide consumers with enough misinformation to make the idea of long-term Beanie scarcity seem plausible." (pp. 145-6)

"Expectations were enormous. McDonald's reported production of one hundred million Teeny Beanie Babies, enough to fill the largest Happy Meal order in history. It was a prediction that there would be enough demand to sell one for every household in America within a span of just a few weeks.... That should have warned consumers that these were unlikely to be scarce enough to appreciate in value, but it didn't....

"Some customers ordered a hundred Happy Meals and asked the cashier to keep the food. Stores received hundreds of calls her hour....

"Two weeks into a planned five-week phenomenon, 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 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....

"Three days after the McDonald's giveaway ended, the Chicago Cubs were in the midst of one of the worst seasons in team history... but they had a special event that day: a Beanie Baby giveaway that 37,958 paying spectators showed up for.... Aside from the Cubs' first home game in 1988... the giveaway had done more to drive ticket sales than any event in its history." (pp. 156-160)

"By 1998 a USA Weekend poll found that 64 percent of Americans owned at least one Beanie Baby." (p. 163)

"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." (p. 164)

"The continuing escalating demand and prices were driven by one of the most fundamental fallacies identified by behavioral economists: humans extrapolate trends and assume that historical price-appreciation patterns will continue even when it is future demand, not past returns, that will impact prices in the long run....

"Far from eliciting skepticism about an overheating market, inflated prices serve to lure more investors in....

"Just like the mutual fund managers who resisted Internet stocks until the worst possible moment, some of the flea market vendors who had been smart enough to avoid Beanies in the early days jumped on the bandwagon just as the craze peaked.

"Manias are often remembered for the peak - the most spectacular period of a frenzy that seemed to have come out of nowhere. Yet in every case it's the slow growth in the beginning, from a tiny base, which ignites the stories that spread the excitement. The year after most outside experts predicted the Beanie Baby fad had already peaked, Ty's wholesale shipments doubled again - and prices on the secondary market continue to climb. It was too late to get any of the really rare Beanies at bargain prices; the Chicago women, whose credibility had increased as the doubers' had diminished, already had those. The ones collectors were clamoring to buy in gift shops were arriving from China by the tens of millions.

"As Rinker was warning, it was the worst possible time to start collecting Beanie Babies, so naturally, more people than ever started collecting Beanie Babies." (pp. 165-7)

"The rising volume of listings on eBay, which had initially contributed to the excitement of Beanie collecting, was now making it easier for collectors to find the Beanies they were missing. The market had become more transparent, and price guide publishers had lost their ability to impact prices. Now you could see values in real time, and any slowdown in growth could instantly stoke pessimism." (p. 171)

"By 1999 [the fraction of Beanies being sold to speculators] was nearing 100 percent, and the only thing that seemed to bring Beanie collectors together was greed. One former Ty sales rep, who once traded a single rare Beanie Baby for a set of braces for her daughter, recalls that as much money as she was making, her visits to retailers had become dark and depressing by 1999. 'I was in a store in South Bend, Indiana, and there were these women who could not afford shoes for their children, but they were carting wheelbarrows full of Beanie Babies.' " (p. 176)

"In Sherman Oaks, Calfornia, a masked man walked into a gift shop with a gun, ordered everybody to the ground, and broke a display case to steal forty Beanie Babies valued at a total of $5,000.... 'He didn't want the cash register... all he wanted was the Beanie Babies.' " (p. 177)

"Even in a trailer park in Elkins, West Virginia, people wanted Beanie Babies. Without the wealth to speculate in the stock market, spending $50 on plush was their connection to the so-called new economy." (p. 178)

"Warner knew that things were coming to an end. He had always said that as long as kids were fighting over Beanie Babies that his business would be find, but now there were enough Beanies being shipped to eliminate the need for fighting - and it was only adults who cared about Beanie Babies anymore anyway.

"Speculative bubbles rely on constant upward movement; once the momentum slows, the bubble collapses. By 1999 every single person who could become a Beanie Baby collector already was one. With no prospects for an influx of increased demand, prices stagnated because there was nothing else for them to do. Once casual collectors could no longer count on quick price appreciation, they dropped out - and then prices fell as the market contracted, driving out still more collectors." (p. 187)

"Warner's previously exacting standards of quality seemed to have disappeared. 'They'll buy it!.. I could put the Ty heart on manure and they'd buy it!'

" 'Ty came to believe that he was a genius, and that every idea he had was brilliant.... After the Beanie mania had produced huge financial results, he focused on the money rather than the people.' " (p. 189)

"That's always what happens after a mania ends. There is some cause that everyone points to... and the intrinsic impermanence is cast aside." (p. 196)

"The same capacity for delusion that fueled the bubble at its height allowed its participants both to maintain their self-esteem after it was over and to fail to learn anything from it. Few of the craze's acolytes acknowledge its insanity even in hindsight. If the mass retirement announcement had not happened, they all seem to believe, the Beanie craze might still be on." (p. 197)

"All you could do was look at them - except they had a way of looking back at you and making you think about all the money you had spent on them. The only thing you could really do with them is brag about how many you had. And no matter how many you had, there was always somebody who had more." (p. 200)

"Even with Beanies selling (and mostly not selling) at yard sales and flea markets for fifty cents each, Warner wouldn't allow any of them to be valued at less than $5 to $7." (p. 202)

"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." (p. 203)

"Retired soap-opera-star-turned-Beanie-hoarder Chris Robinson started his collection in 1998, at the absolute height of the market. During the decline in 1999 and early 2000, he'd doubled down on his gamble: when local gift shops went out of business, Robinson bought out their Beanie Baby inventories at wholesale prices, fancying himself a value investor. Between that and his earlier days lining up at stores as they unloaded shipments, his investment in Beanies stretched well past the $100,000 mark. Today, much like the stock speculators who simply stopped logging in to their brokerage accounts post-2000, he can't bring himself to go online and check the current values.

" 'Before I die, I guess I have to find out what they're currently worth, Robinson, now in his midseventies, says. 'If it takes twenty years, the kids will all have them. They can spit them up - and play with Beanie Babies. Or sell them...' " (p. 223)

"The implosion of Beanie Babies and the rise of eBay brought the broader collectibles industry to its knees.... 'Ten years earlier, it was difficult to connect with people and find pieces.... 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.' " (p. 225)

"A few Beanie Babies, the ones that were retired prior to the craze's taking off in 1996, are still worth $50 or $100 - occasionally a few hundred for the rarest pieces, once supposed to be enough to cover the down payment on a McMansion. At least 99.5 percent of the perfectly preserved Beanie Babies from the late 1990s are today worth significantly less than they retailed for." (p. 243)

"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. A few years ago, Warner's sister emptied her closets of the hundreds of Beanie Babies she'd accumulated haphazardly during the craze years - they were made by her brother, after all - and dropped them off at the nearest children's hospital.... Today's kids known them only as toys because they're too young to remember that there was at time when people abandoned their senses over beanbag animals." (pp. 243-4)

SAT Vocabulary Words

Pluck: spirited and determined courage.
"anyone with pluck and a willingness to take some risks to close a sale" (p. 18)

Concern: a business; a firm.
"a fast-growing stuffed-animal concern" (p. 20)

Vagary: an unexpected and inexplicable change in a situation or in someone's behavior.
"Warner was too 'narrowly concentrated' for the vagaries of corporate life" (p. 25)

Brassy: (typically of a woman) tastelessly showy or loud in appearance or manner.
"his neighbor, Patria Roche, a bold, brassy lady who looks and acts like Liza Minnelli" (p. 28)

Cachet: the state of being respected or admired; prestige.
"gave Ty Inc. the cachet of being associated with 'designers,' thereby making the company seema  little more high-end than other lines where a bear was just a bear" (p. 37)

Avaricious: having or showing an extreme greed for wealth or material gain.
" 'How to Double Your Money in Collector's Plates: Guaranteed Return with No Risk....' Lest the appeal seem avaricious, readers were also assured that they could 'own and enjoy the beauty of true works of art.' " (p. 70)

Ethos: the characteristic spirit of a culture, era, or community as manifested in its beliefs and aspirations.
"moms are part of an ethos 'that encourages consumerism as the solution to the work/life struggle' " (p. 75)

Maven: an expert or connoisseur.
"first as a Beanie collector, then as a Beanie maven" (p. 75)

Gibe: an insulting or mocking remark; a taunt.
"At the Toy Fair in February 1996, a stranger approached Warner and offered him $2 million for the Beanie Baby line. Warner replied that he'd consider $100 million - which at the time was just a gibe. But it would soon represent less than one month's sales." (p. 78)

Dour: relentlessly severe, stern, or gloomy in manner or appearance.
"Steiff had grown up in a well-to-do but dour and toy-less family and later recalled her gratitude at being allowed once to play with a pile of lentils, which she poured between cups." (p. 79)

Impresario: relentlessly severe, stern, or gloomy in manner or appearance.
"a collectibles impresario and the publisher of Rosie's Collectors' Bulletin" (p. 93)

Injunction: a judicial order that restrains a person from beginning or continuing an action threatening or invading the legal right of another, or that compels a person to carry out a certain act, e.g., to make restitution to an injured party.
"won an injunction... Warner capitulated and paid him $150,000" (p. 111)

Hawk: carry around and offer (goods) for sale, typically advertising them by shouting.
"hawked a $2,000 collection of ninety-four Beanie babies by explaining that many of the pieces in the collection would be retired soon" (p. 114)

Uncouth: (especially of art or language) lacking sophistication or delicacy.
"How very uncouth that they would put [money] ahead of customers in this respect"

Excoriate: censure or criticize severely.
"A parent wrote in to excoriate the very idea of adult Beanie collectors: 'You should be encouraging people to let the children have their toys and find their own items to collect.' "( p. 139)

Cloy: disgust or sicken (someone) with an excess of sweetness, richness, or sentiment.
"cloying tales of the impact Beanies had on people's lives" (p. 140)

Acolyte: a person assisting the celebrant in a religious service or procession.
"Few of the craze's acolytes acknowledge its insanity even in hindsight." (p. 197)

Halcyon: denoting a period of time in the past that was idyllically happy and peaceful.
"retailers Ty would never have imagined selling to in the halcyon days" (p. 201)

Jilted: suddenly reject or abandon (a lover).
"jilted lovers" (p. 209)

Arraign: call or bring (someone) before a court to answer a criminal charge.
"plead guilty at his arraignment" (p. 213)


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