Hello, and welcome to another episode of the Odd Thoughts Podcast. I'm Tracy Alloway and I'm Joe Wish. Joe, I am really sad to say we are coming to the end of our bubble series. I thought you were going to say we're coming to the end of the podcast overall, so I'm actually kind of relieved that were But I am sad too. I think I said it last time, like, bubbles are just the best. Yeah, I love talking about them. We'll probably talk about them again on you know, future episodes, but for now we are we're wrapping up, all right. So as we wrap up, and as you look over a bunch of the different bubbles that we've just been um learning about, what stands out for you, like what are the lessons that you're actually taking away? Human psychology is just so consistent. I think it was the first one we talked with Scott Nations about various booms and bust throughout US stock market history. There's always the great story that goes with them. And so at the kernel of every bubble that we talked about, there's some route of truth to it. It's not a complete fabrication. Something at some point made some sense and then of course humans being uh, the animals that we are, we just can't put things in perspective and we extrapolate way too far. Yeah, that's something that's going to stick with me as well. There's always a certain narrative to explain what's happening. The other thing I was thinking about is almost every bubble that we've spoken about comes or spurs a sort of cottage industry around it, Like crazy things like you know, the guys that used to stand outside in Florida trying to hawk during the lamb bubble Binder boys, that's it. Or the baseball card bubble, all the new sets of baseball cards that came in. Yeah, that specifically the way supply expands when people are in a mania for X. Whatever it is, whether it's land, whether it's baseball cards, whether it's uh, some sort of equity or whatever, the industry will find a way to create supply. The supply never just states fixed. And of course, you know we talked about the Florida real estates, so you know, people have just bought marsh land in the middle of nowhere when all the prime real estate like around Miami was sold up. So they always find a way to sell something new. People don't just sort of say they bought it all and now prices will go up. The supply eventually swamps demand. The one thing I'm a little bit sad that we didn't learn more about is uh the catalyst for the bubbles actually bursting. Because if we knew that, if we knew that, Joe, we could make so much money. We could all be rich. We just have to you just see a bubble and just ride it until the day before. Yeah. Alright, well, as it is, we have to stick with the podcasts and various other things. But to celebrate the end of our Bubble series, we are going to share with our listeners a rerun of one of our most favorite bubbles ever. That's right. So obviously, as we're saying, we're probably going to keep doing more episodes in the future about bubbles from time to time. Of course, we did some even before we started the original series, and there was one in particular that really stood out there just like totally fits, doesn't it. Yeah, this was one of our earliest ever episodes and it was so much fun. It was one on the Beanie Baby Bubble. So for those of you who are unfamiliar with it. In the nines, Beanie Babies, these small stuffed animal toys, became a huge cultural phenomenon, and with that phenomenon came a lot of speculation, a lot of trading that came with it. Right, and you know, they're just stuffed animals, But there was this a lot of the teams that we discussed in this episode we discussed with other Bubbles on later episodes. So the supply thing that we just mentioned at one point, you know, the idea was that once a line of these stuffed animals was made, there would never be another one, but the supply expanded massively. Last week, remember we talked about the role that the Beckett magazine had in baseball cards, the sort of first pricing guide, the price guide. Sure, Beanie Babies, as we discussed on that episode, also had their price guide. Very similar idea, very similar phenomenon at work. As soon as people could see visually that prices were changing every month or every week, that made people even more inclined them to see them as speculative vehicles. Yeah, and of course, in the same way that you were a young boy trading baseball cards, I was a young girl trading beanie babies. So yeah, it was the same time it was traditional gender roles here at Joe. All right, so this episode, let's see it aired. It was November, so well almost two years ago. It's crazy, all right. So this is the beanie baby bubble from November two thousand and fifteen. We interviewed Zach Bissinett. He's a prolific author and he wrote a fantastic book on this exact topic. Take a listen, Joe. I've got a question for you. What were you doing to make money in the summer of nine was the best summer because I think I made about two thousand dollars from just a summer job that I had. But then I put that all into stocks because it was the Internet bubble, and I basically paid for two years of college thanks to essentially what I did that summer. So that's amazing. It was. It was a good time. Well, I was making money to a little differently. I was still in middle school. I was going to garage sales and selling old toys and one of the things I sold was a tiedyed beanie baby lizard, and I sold it for two hundred dollars to a forty year old man and at the time me as an eleven year old, I thought this was amazing money and I was rolling in it. That is amazing money objectively for any age selling a stuffed animal for two dollars, right, So why are we talking about this today? We're going to delve into what can drive seemingly rational people to spend hundreds, sometimes thousands of dollars on stuffed animals. We're going to talk about the beanie baby bubble, and we're going to talk about something more than that. We're going to talk about bubbles in general, the Internet bubble, and the psychology behind speculative mania. So here with us today is Zach Bissonett. He's the author of The Great Beanie Baby Bubble, Mass Delusion, and the Dark Side of Cute. It's a book that came out earlier this year and I just happened to finish it this morning. Zach, and thanks for joining us. So why did you write a book about beanie babies so animals? I like you. I was in middle school when the beanie baby craze hit, and I was kind of a nerd, and I was into like old books and antiques and that kind of thing. And every weekend I would go to this flea market on Cape Cod with my mother and we had never heard of beanie babies, and then all of a sudden, out of nowhere, that flea market was like beanie baby dealers, and they were wearing like Fannie packs and visors and talking just really really excitedly about how much they were going up in value and how this one they just paid five dollars for was now worth forty and they're not going to sell it this week because next week it'll be worth fifty. And that was like that for about two years, and then all of a sudden it was gone and no one ever talked about it again. I just I just want to say, uh, during those same years that my mother was dating a guy who was antique dealer, and so I also went to a lot of flea markets in New England, and I actually saw all the exact same thing, where suddenly there were these flea markets where that used to be people bringing out their old stuff from their barns and then it's just people have stuff down and used to be traditionalist antique dealers hated it. Yeah, there was there was one guy I talked to who who he was so proud of this. He was a traditionalist antique dealer who had just railed against beanie babies. He would go on CNN, I would say, I'm not in kidding. CNN would have these like debates between this guy who they called the beanie Meanie and and the beanie baby experts who were making millions of dollars selling One of them sold a million copies a month of a beanie baby magazine that she was publishing, and they would have these debates and this, and this traditionalist antique dealer was given a group of antique dealers in Indiana gave him a crucified skunk beanie baby with a certificate thanking him for being a traditionalist who stood up for traditional antiques. So this is the amazing thing. Walk us through how the beanie baby bubble came in to existence and how we at one day actually got to the point where people were debating the value of stuffed animals on CNN. So it starts out with this this very sort of eccentric toymaker named Tie Warner, who dropped out of Calamazoo College, tried to become an actor, failed at that, then became a toy salesman was wildly successful at that, but then he got fired from that and decided to start his own stuffed animal company. And he started to create these beanie babies initially because he thought at a five dollar price point, they would be irresistible and that it would help him sort of a foot in the door with large accounts, and that he would then be able to kind of up sell bigger stores on selling his larger stuffed animal line. And it didn't work at all. I remember talking to talking to to the sales reps for Tye who remembered just there was no interest in these bean babies. People worried they were cheap, They thought they looked cheap. They worried people would buy the beanie babies instead of a more expensive product. He was just not getting any interest in them. But Ty Warner, the guy created them, really really believed in this product, and he combined that belief with an extremely sort of eccentric, obsessive approach to the product and the people who who had worked with him, which at the beginning was just his girlfriend. But but she remembered when I when I talked with her, he would keep her up until like four in the morning, debating one color of the ribbon on a bear should be. And then she'd think they would finally be done debating the color, and he would say, well, what if it was tied this way instead of the other way, And then they would have to go back through the iterations of different colors again for hours. So he had this really really obsessive approach to the product. This is how the retirement came into being, right precisely, And so sometimes he would come out with a product and then a few months after he chipped a few thousand of them, he would like wake up in the middle of the night basically and decided that it should be a different color. So like one of his first beanie baby is not not one of the very first, but one of the one of the first was Peanut the Elephant, who was originally a royal blue color. And then after a few months of that, I think he chipped I think like four hundred I can't remember the fourteen hundred or so of the of this beanie baby, and he decided it shouldn't be royal blue, it should be baby blue. And so the fact that they would get retired and never made again. There were never more than that that's how they became collectible that people would see is going up in value entirely accidentally. So because this is happening before anyone cares about these, his annual sales are like four million dollars a year at this point, mostly not from beanie babies. No one cares about beanie babies. Then all of a sudden, this small group of people in suburban Chicago who lived on one cul de sac started collecting beanie babies. They saw them in stores because they were near where TY was headquartered, so that he had a big presence in stores there. And they decided they liked these beanie babies and that they wanted to assemble complete collections for their kids. And they became very obsessive. These were soccer mons. They came very very obsessive with trying to assemble complete collections. And so they would call stores and other towns to ask them what beanie babies they had. And then, and they remember this the sort of very strange converse, they would realize that there would be like these weird variations, and these were the ones that he had retired, just changed the designer because he took a few thousand and then changed entirely accidentally, and they started paying each other more for these kind of beanie babies, started this small market for them just in this town. As this started to happen, As this kind of starts in this small town, this woman, Peggy Gallagher, and her sister, Dr. Paula Brinko, who was a doctor, had this idea, you know, we're just calling stores like in the Chicago area where this all started, but if we call stores in like other states, we'll be able to find beanie babies that are really rare that no one else has. So they go to start going local chambers of commerce and getting lists of all of the gift shops. The woman who's a doctor is at the same time that she's doing this, she's she's doing this study on women who were like diabetic or something where she had to call hospitals to talk to their researchers, and after she called the researcher, she would ask to be transferred to the gift shop to ask about beanie babies so she could try to order the rare one. But this is the part of the story that I love, because we eventually go from this like small group of soccer mom collectors who professionalize themselves as beanie baby dealers and beanie baby market experts. I mean one of them had a Beanie World magazine. She was a self described Chicago suburban soccer mom. She had a magazine with the circulation of more than one million million a month and more ads per copy than Glamour. These were like thick magazines full of ads. So people start seeing the priceless for these beanies and they all figure prices are going to go up forever. These are good investments, right, well right, And the stores that are hearing all of a sudden out of nowhere start getting calls from these out of state collectors are like, oh my gosh, beanie babies are really hot. It starts out as like two people did the did the magazine that published the prices? Because I remember I used to collect baseball cards when as a kid, and there was the Beckett magazine and there was like a crucial avenue by which the baseball card bubble which also burst. You know, everyone checked the prices each month. So did the magazine for bringing beanie babies serve a similar purpose hugely, so that there's a reflexivity. I think two price guides where they impact prices as much as they report on them. And the first priceless which were pread about Lady Peggy Gallagher, which she started to circulate. She put an ad in like a magazine for other collectors saying he sent her self address stamped envelope, she would send you this checklist and she was like, well, what should I do? Her prices? She just made them up, basically, she told me this that she said this one's rare, so that one should be worth twenty. These were not really based on anything, and then she kind of sat back and watched on like the AOL message boards, is these priceless she was making up kind of became the the price and so talk about that how the Internet and those are the early days of the Internet helped stoke that bubble, so that this is a be Babies were ten percent of ebays sales in the early days of ebays. eBay disclosed in the risk factors to its sec FI lanes a dependence on the contain crazy fact yes, and so people were getting computers and beanie babies more than anything. Really gave people a reason to go on eBay and to do online trading and actually just e commerce in general, not just there was also trader and message wards. In the early days of e commerce, there were a lot of stories that it was not growing as quickly as people thought it would. People weren't comfortable with it. Stuff was too expensive to ship with beanie babies something that had a kind of weird You weren't sure exactly what they were worth. They were easy to ship, and they were really hard to find locally. It brought people onto e commerce in a way that other more mundane products like pets dot Com we're not able to. So even though it's a completely pointless bubble of ultimately worthless stuffed animals, it actually did help. It had a beneficial effect on the development of these Internet markets. Meg Whitman has said in interviews that that eBay and I think p r om yards had the same thing that you know, eBay may not have gotten off the ground without beanie babies. Joe, I know, you remember what the late nineties were like. Um, when we look back on beanie babies, it seems amazing that people spent all this money on them all this time. We had one, at least one instance of a guy committing murder because of a soured Beatie Baby deal. Do you remember how nuts it was the late ninety Are you talking about beanie babies? Are just the late nineties? And I mean I would say they're linked, right, They're absolutely the people who when they think back and they talk about the nineties bubble, it's often referred to as the tech bubble or the Internet bubble or the dot com bubble, it completely misses the point. Yes, it was so much bigger. It was such a big I like the closest thing I was like. It was a sense of optimism about everything all at the same time. And so there's so many wonderful stories about people completely losing their mind. My ingle favorite story of the late nineties bubble was when a car dealership in Nevada. It was called Uniprime Capital Acceptance. And I remember this very vividly because I was on the message boards at the time. It was a penny stock maybe you traded trading. I was. They they put out a press release that said they had a cure for AIDS. A car dealership in Nevada, Like someone we've worked with or if we licensed this thing from a scientist. They just straight up we have a cure for AIDS, and you know, even in the craziest times, like that's kind of a skeptical belief, but enough people believed that that the stocks surged, it doubled, and then it doubled again because just on the possibility that maybe a car dealership in Nevada had found a cure for AIDS. People were so optimistic of everything that it seemed not a unbelievable And people talk about the internet stocks, anything that was that breathed on the Internet, people going crazy for One of my favorite facts is the fact that k Tell, the company that makes really cheesy compilation CDs of like seventies DISCOMs, they sold their CDs online, Big whoop. The stock grew tenfold at one point, and then over the span of a few months, people were losing their minds. And then the other fact that I love is the fact that the Segue that you know, didn't really take off, but people still go tours around. People really thought entire cities were going to be redesigned because of how the Segue got people around. So basically it was a time of just incredible optimism about everything. So, Zach, I'm curious in your book you quote a lot from existing, you know, economic and financial literature. You quote people like Robert Schiller on the optimism that precedes bubbles when it comes to beanie babies. If you could kind of pinpoint one thing that flipped it into speculative mania, what would it be. It's people seeing prices rise. That that is what drives what drives speculative bubbles, is that as soon as there's you know, this insignificant phenomenon of someone who's trying to complete a set for their kid, as soon as they pay a hundred dollars for a beanie baby that someone paid five dollars for, that's what sets in motion. Or these can set in motions certainly this kind of chain, because that becomes a story. And beanie babies, and I think all bubbles are spread by by narrative, by people saying I bought this beanie baby for five dollars and sold it for a hundred. Anyone who did that told a thousand people about it because it was so weird, So hum big did it get in the end? Is there an estimate of what the total outstanding value of beanie babies was at the TIS annual sales peaked It around one point five billion dollars um and that was just wholesale other people who there must be but have a bunch and held it all the way down and now just they live in a hou filled with it. There is a retired soap opera star in Arizzona. I think I remember what's been so long as I talked to him. Um, there's a retired soap opera star who lost his kids six figure college funds on them and has like thirty thousand of them still in his home. That's we talked about how these sort of bubbles began, at least in the case of beanie babies, how did it end, because it did start to fizzle out in and within a couple of years the secondary market value of thousands millions of stuffed animals was gone. This was one of the funniest things about the reporting on this, and I think there's a lot of very similar stuff with the reporting on the housing bubble and the Internet stock bubble, is that I would kind of pose this question to the collectors anti executives about kind of how this thing had ended, and they all had these really specific explanations for it, these kind of linear cause and effect things, you know, like you know, there was one saying, oh, you know, the counterfeits really invaded the market and people were paying you know, six hundred dollars and if it hadn't for pieces they trying to be fake, and if it hadn't been for all the fraud this, you know, it wouldn't have ended that way. A lot of people felt, you know, Ty got greedy and made too many, too many styles, um and and and and overproduce them. And I'm like, okay, you know, maybe kind of, but you know, if he hadn't done that, then being would they still be ten per cent and B B based sales and we'd all be rich. I Mean, these things end because they're stupid, right, Like that's ultimately they're they're unsustainable, and eventually there is something that nixed them and causes that kind of the kind of cascade of confidence that started it to just crescendo down and and that's what happened. Um, there's this thing. At the end of nine. Everything is still basically going well. Secondary market sales still good, top pieces still valuable, some overproduction on some of the newer pieces, those are stacking up a little bit, but basically still a strong market. No one's saying this things ending, collectors still confident, magazine still selling, and Tie announces at the end of that on that on January one, all of the Beanie Babies will be retired. Whoa, and that they won't be made anymore. Theoretically, prices should have gone through the roof at that point for a minute. Yeah, um, they did for a minute, and people were very excited, and people like, what's going on? This is going to do a different product and uh. And then he announced that he would do a vote to raise money for AIDS on whether people wanted to Beanie Babies to continue, and you would log in and online and don't and donate that there was some other stuff going on in his life, but where you could donate a dollar forty nine. I think it was to vote on whether Beanie Babies should be continued. First, I'll raise the question of who would spend a dollar fifty to vote to end Beanie Babies. We're not kind of like. But so he does this and almost no one does voted, ended up time to donate all the money himself because he hadn't gotten so many votes as he had claimed he had, and announced that Beanie Babies would be continued and that all the new releases, there would be all these new millennium collection coming out and no one cared, and the whole thing just every month after that, the sales collapsed and people started to that cause your crisis of confidence about the and then what causes and then what happened was so these were tire beanie babies. I remember talking to one of the first collectors who was under way back from speaking in a beanie baby convention as a paid expert, you know, like a keynote speaker on beanie babies, and she was at the O'Hare airport and she saw a stack of beanie babies. There were still five dollars in the store, but we're retired, and this was like mind blow. I mean, people thought it was a law of physics that a retired beanie baby was worth more than five dollars and that that was just true. And uh, I mean, you know, kind of like you know, hoving prices don't go down. None of the models included that. None of their models include the idea that a retire beanie baby could conceivably still just be worth the retail price. So one of my favorite stings on Wall Street is that the only thing that's a bubble, well, something becomes a bubble once the bubble bursts. Anything else is a great trade, right he just made Tony. When you look around the world, it seems like we are continuously seeing warnings about bubbles again in tech, lots of other areas and financial markets. Having studied, uh, the science of stuffed animals, do you have any wisdom for how we can spot bubbles before they burst and before they burst? Yeah, I mean, you know, I think the thing, just behaviorally is that when wood is driving, it is entirely stories about how much money people have been making on it. That's something to be really concerned about. And I think any time you have a kind of surge of interest in new entrants into a field based on sort of past successes of other ones. There was a ton of that with the Internet bubble. You had legitimate companies, we go public first, and then the next one you know, this is gonna be the next that and that was a piece of crap. So I think I think those are you know, anytime you see well to me, you know, to bring your point to the current era. You know, we've been hearing about a possible tech bubble for the last ten years. I mean, when Facebook was valued at a billion dollars, people said tech bubble, and now it's worth hundreds of times hundreds of times that. But I did see an add on Instagram this week that like was promising how to make your billion dollar app, like a service that would teach people how to make an app that would be worth a billion dollars. And that reminds me of like telling stories just about the money. It's like it is the next level of the euphoria. I always love those like JP Morgan shoeshine bubbie stories about bubble. So I think, I mean, I remember when I was in high school, my bus driver and this was dangerous because he was driving a bus full of kids and he had to cell phones and he was slipping houses while he was driving talking to his like real estate ass and his manager at I just so I always look for things like that, and im when that year at a summer job, we'd go to the pizza place and they would also while it was just a little pizza shop, and they would also have a rival financial network to Bloomberg on TV all the time. And you know, I think the pizza. You know, that was what the pizza guys were watching was CNBC Wow, rival network. Well, said Joe, you actually managed to make some money from internet stocks. How did you time it? Because it seems like the timing is key here. Lots of people did get rich off beanie babies and lots of people got really poor. It was really it was the best luck I've ever had. I was trading through UM the basically Christmas break of two thousand and or anyway two thousand and then I UM had to study. I studied abroad in Switzerland, and the ring of two thousand and before I left UM, I sold all my stocks because like, I'm not going to be able to trade while I'm studying abroad. That it didn't seem plausible. And then the bubble birth while I was studying abroad, So out of pure luck with no insight, you need to craft that into a narrative about your own foresight. No, it was just the opposite. That's just pure luck. I just happened to sell like a couple of months before the peak, so that that worked out well, all right, So you made thousands off internet stocks and I made two bucks from a single beanie baby, but you got to cuddle it, so that's okay. I'm not sure. Um, all right, Zach, it was lovely having you on the show. Thank you so much. It's great. Thank you all right, Joe, We just had a really interesting, entertaining conversation. What did you learn? I actually think my favorite single fact was that point about the magazine and the relationship between seeing prices written down and seeing prices move and then the effect that has on actual prices. I think that's a fascinating point, right. I just love the idea that this group of soccer moms in Chicago became a market and Tycoons and I have thought about that before, this idea of their being there needing to be a complete set of them, um, and so it sort of creates this inherent scarcity to them that drives up demand. That was an aspect of the beanie baby boom that I had not realized before. All Right, Well, artificial scarcity is a hot topic in economics right now. Maybe that's something for another podcast. This is Tracy Alloway. You can find me at Tracy Alloway on Twitter and I'm Joe Wisnthal. Find me at The Stalwart on Twitter and If you want to follow Zack, he's on Twitter too at Zach Pissinet. And thank you for listening to Odd Lots. Tune in next time. O

Hello, and welcome to another episode of the Odd Thoughts Podcast. I'm Tracy Alloway and I'm Joe Wish. Joe, I am really sad to say we are coming to the end of our bubble series. I thought you were going to say we're coming to the end of the podcast overall, so I'm actually kind of relieved that were But I am sad too. I think I said it last time, like, bubbles are just the best. Yeah, I love talking about them. We'll probably talk about them again on you know, future episodes, but for now we are we're wrapping up, all right. So as we wrap up, and as you look over a bunch of the different bubbles that we've just been um learning about, what stands out for you, like what are the lessons that you're actually taking away? Human psychology is just so consistent. I think it was the first one we talked with Scott Nations about various booms and bust throughout US stock market history. There's always the great story that goes with them. And so at the kernel of every bubble that we talked about, there's some route of truth to it. It's not a complete fabrication. Something at some point made some sense and then of course humans being uh, the animals that we are, we just can't put things in perspective and we extrapolate way too far. Yeah, that's something that's going to stick with me as well. There's always a certain narrative to explain what's happening. The other thing I was thinking about is almost every bubble that we've spoken about comes or spurs a sort of cottage industry around it, Like crazy things like you know, the guys that used to stand outside in Florida trying to hawk during the lamb bubble Binder boys, that's it. Or the baseball card bubble, all the new sets of baseball cards that came in. Yeah, that specifically the way supply expands when people are in a mania for X. Whatever it is, whether it's land, whether it's baseball cards, whether it's uh, some sort of equity or whatever, the industry will find a way to create supply. The supply never just states fixed. And of course, you know we talked about the Florida real estates, so you know, people have just bought marsh land in the middle of nowhere when all the prime real estate like around Miami was sold up. So they always find a way to sell something new. People don't just sort of say they bought it all and now prices will go up. The supply eventually swamps demand. The one thing I'm a little bit sad that we didn't learn more about is uh the catalyst for the bubbles actually bursting. Because if we knew that, if we knew that, Joe, we could make so much money. We could all be rich. We just have to you just see a bubble and just ride it until the day before. Yeah. Alright, well, as it is, we have to stick with the podcasts and various other things. But to celebrate the end of our Bubble series, we are going to share with our listeners a rerun of one of our most favorite bubbles ever. That's right. So obviously, as we're saying, we're probably going to keep doing more episodes in the future about bubbles from time to time. Of course, we did some even before we started the original series, and there was one in particular that really stood out there just like totally fits, doesn't it. Yeah, this was one of our earliest ever episodes and it was so much fun. It was one on the Beanie Baby Bubble. So for those of you who are unfamiliar with it. In the nines, Beanie Babies, these small stuffed animal toys, became a huge cultural phenomenon, and with that phenomenon came a lot of speculation, a lot of trading that came with it. Right, and you know, they're just stuffed animals, But there was this a lot of the teams that we discussed in this episode we discussed with other Bubbles on later episodes. So the supply thing that we just mentioned at one point, you know, the idea was that once a line of these stuffed animals was made, there would never be another one, but the supply expanded massively. Last week, remember we talked about the role that the Beckett magazine had in baseball cards, the sort of first pricing guide, the price guide. Sure, Beanie Babies, as we discussed on that episode, also had their price guide. Very similar idea, very similar phenomenon at work. As soon as people could see visually that prices were changing every month or every week, that made people even more inclined them to see them as speculative vehicles. Yeah, and of course, in the same way that you were a young boy trading baseball cards, I was a young girl trading beanie babies. So yeah, it was the same time it was traditional gender roles here at Joe. All right, so this episode, let's see it aired. It was November, so well almost two years ago. It's crazy, all right. So this is the beanie baby bubble from November two thousand and fifteen. We interviewed Zach Bissinett. He's a prolific author and he wrote a fantastic book on this exact topic. Take a listen, Joe. I've got a question for you. What were you doing to make money in the summer of nine was the best summer because I think I made about two thousand dollars from just a summer job that I had. But then I put that all into stocks because it was the Internet bubble, and I basically paid for two years of college thanks to essentially what I did that summer. So that's amazing. It was. It was a good time. Well, I was making money to a little differently. I was still in middle school. I was going to garage sales and selling old toys and one of the things I sold was a tiedyed beanie baby lizard, and I sold it for two hundred dollars to a forty year old man and at the time me as an eleven year old, I thought this was amazing money and I was rolling in it. That is amazing money objectively for any age selling a stuffed animal for two dollars, right, So why are we talking about this today? We're going to delve into what can drive seemingly rational people to spend hundreds, sometimes thousands of dollars on stuffed animals. We're going to talk about the beanie baby bubble, and we're going to talk about something more than that. We're going to talk about bubbles in general, the Internet bubble, and the psychology behind speculative mania. So here with us today is Zach Bissonett. He's the author of The Great Beanie Baby Bubble, Mass Delusion, and the Dark Side of Cute. It's a book that came out earlier this year and I just happened to finish it this morning. Zach, and thanks for joining us. So why did you write a book about beanie babies so animals? I like you. I was in middle school when the beanie baby craze hit, and I was kind of a nerd, and I was into like old books and antiques and that kind of thing. And every weekend I would go to this flea market on Cape Cod with my mother and we had never heard of beanie babies, and then all of a sudden, out of nowhere, that flea market was like beanie baby dealers, and they were wearing like Fannie packs and visors and talking just really really excitedly about how much they were going up in value and how this one they just paid five dollars for was now worth forty and they're not going to sell it this week because next week it'll be worth fifty. And that was like that for about two years, and then all of a sudden it was gone and no one ever talked about it again. I just I just want to say, uh, during those same years that my mother was dating a guy who was antique dealer, and so I also went to a lot of flea markets in New England, and I actually saw all the exact same thing, where suddenly there were these flea markets where that used to be people bringing out their old stuff from their barns and then it's just people have stuff down and used to be traditionalist antique dealers hated it. Yeah, there was there was one guy I talked to who who he was so proud of this. He was a traditionalist antique dealer who had just railed against beanie babies. He would go on CNN, I would say, I'm not in kidding. CNN would have these like debates between this guy who they called the beanie Meanie and and the beanie baby experts who were making millions of dollars selling One of them sold a million copies a month of a beanie baby magazine that she was publishing, and they would have these debates and this, and this traditionalist antique dealer was given a group of antique dealers in Indiana gave him a crucified skunk beanie baby with a certificate thanking him for being a traditionalist who stood up for traditional antiques. So this is the amazing thing. Walk us through how the beanie baby bubble came in to existence and how we at one day actually got to the point where people were debating the value of stuffed animals on CNN. So it starts out with this this very sort of eccentric toymaker named Tie Warner, who dropped out of Calamazoo College, tried to become an actor, failed at that, then became a toy salesman was wildly successful at that, but then he got fired from that and decided to start his own stuffed animal company. And he started to create these beanie babies initially because he thought at a five dollar price point, they would be irresistible and that it would help him sort of a foot in the door with large accounts, and that he would then be able to kind of up sell bigger stores on selling his larger stuffed animal line. And it didn't work at all. I remember talking to talking to to the sales reps for Tye who remembered just there was no interest in these bean babies. People worried they were cheap, They thought they looked cheap. They worried people would buy the beanie babies instead of a more expensive product. He was just not getting any interest in them. But Ty Warner, the guy created them, really really believed in this product, and he combined that belief with an extremely sort of eccentric, obsessive approach to the product and the people who who had worked with him, which at the beginning was just his girlfriend. But but she remembered when I when I talked with her, he would keep her up until like four in the morning, debating one color of the ribbon on a bear should be. And then she'd think they would finally be done debating the color, and he would say, well, what if it was tied this way instead of the other way, And then they would have to go back through the iterations of different colors again for hours. So he had this really really obsessive approach to the product. This is how the retirement came into being, right precisely, And so sometimes he would come out with a product and then a few months after he chipped a few thousand of them, he would like wake up in the middle of the night basically and decided that it should be a different color. So like one of his first beanie baby is not not one of the very first, but one of the one of the first was Peanut the Elephant, who was originally a royal blue color. And then after a few months of that, I think he chipped I think like four hundred I can't remember the fourteen hundred or so of the of this beanie baby, and he decided it shouldn't be royal blue, it should be baby blue. And so the fact that they would get retired and never made again. There were never more than that that's how they became collectible that people would see is going up in value entirely accidentally. So because this is happening before anyone cares about these, his annual sales are like four million dollars a year at this point, mostly not from beanie babies. No one cares about beanie babies. Then all of a sudden, this small group of people in suburban Chicago who lived on one cul de sac started collecting beanie babies. They saw them in stores because they were near where TY was headquartered, so that he had a big presence in stores there. And they decided they liked these beanie babies and that they wanted to assemble complete collections for their kids. And they became very obsessive. These were soccer mons. They came very very obsessive with trying to assemble complete collections. And so they would call stores and other towns to ask them what beanie babies they had. And then, and they remember this the sort of very strange converse, they would realize that there would be like these weird variations, and these were the ones that he had retired, just changed the designer because he took a few thousand and then changed entirely accidentally, and they started paying each other more for these kind of beanie babies, started this small market for them just in this town. As this started to happen, As this kind of starts in this small town, this woman, Peggy Gallagher, and her sister, Dr. Paula Brinko, who was a doctor, had this idea, you know, we're just calling stores like in the Chicago area where this all started, but if we call stores in like other states, we'll be able to find beanie babies that are really rare that no one else has. So they go to start going local chambers of commerce and getting lists of all of the gift shops. The woman who's a doctor is at the same time that she's doing this, she's she's doing this study on women who were like diabetic or something where she had to call hospitals to talk to their researchers, and after she called the researcher, she would ask to be transferred to the gift shop to ask about beanie babies so she could try to order the rare one. But this is the part of the story that I love, because we eventually go from this like small group of soccer mom collectors who professionalize themselves as beanie baby dealers and beanie baby market experts. I mean one of them had a Beanie World magazine. She was a self described Chicago suburban soccer mom. She had a magazine with the circulation of more than one million million a month and more ads per copy than Glamour. These were like thick magazines full of ads. So people start seeing the priceless for these beanies and they all figure prices are going to go up forever. These are good investments, right, well right, And the stores that are hearing all of a sudden out of nowhere start getting calls from these out of state collectors are like, oh my gosh, beanie babies are really hot. It starts out as like two people did the did the magazine that published the prices? Because I remember I used to collect baseball cards when as a kid, and there was the Beckett magazine and there was like a crucial avenue by which the baseball card bubble which also burst. You know, everyone checked the prices each month. So did the magazine for bringing beanie babies serve a similar purpose hugely, so that there's a reflexivity. I think two price guides where they impact prices as much as they report on them. And the first priceless which were pread about Lady Peggy Gallagher, which she started to circulate. She put an ad in like a magazine for other collectors saying he sent her self address stamped envelope, she would send you this checklist and she was like, well, what should I do? Her prices? She just made them up, basically, she told me this that she said this one's rare, so that one should be worth twenty. These were not really based on anything, and then she kind of sat back and watched on like the AOL message boards, is these priceless she was making up kind of became the the price and so talk about that how the Internet and those are the early days of the Internet helped stoke that bubble, so that this is a be Babies were ten percent of ebays sales in the early days of ebays. eBay disclosed in the risk factors to its sec FI lanes a dependence on the contain crazy fact yes, and so people were getting computers and beanie babies more than anything. Really gave people a reason to go on eBay and to do online trading and actually just e commerce in general, not just there was also trader and message wards. In the early days of e commerce, there were a lot of stories that it was not growing as quickly as people thought it would. People weren't comfortable with it. Stuff was too expensive to ship with beanie babies something that had a kind of weird You weren't sure exactly what they were worth. They were easy to ship, and they were really hard to find locally. It brought people onto e commerce in a way that other more mundane products like pets dot Com we're not able to. So even though it's a completely pointless bubble of ultimately worthless stuffed animals, it actually did help. It had a beneficial effect on the development of these Internet markets. Meg Whitman has said in interviews that that eBay and I think p r om yards had the same thing that you know, eBay may not have gotten off the ground without beanie babies. Joe, I know, you remember what the late nineties were like. Um, when we look back on beanie babies, it seems amazing that people spent all this money on them all this time. We had one, at least one instance of a guy committing murder because of a soured Beatie Baby deal. Do you remember how nuts it was the late ninety Are you talking about beanie babies? Are just the late nineties? And I mean I would say they're linked, right, They're absolutely the people who when they think back and they talk about the nineties bubble, it's often referred to as the tech bubble or the Internet bubble or the dot com bubble, it completely misses the point. Yes, it was so much bigger. It was such a big I like the closest thing I was like. It was a sense of optimism about everything all at the same time. And so there's so many wonderful stories about people completely losing their mind. My ingle favorite story of the late nineties bubble was when a car dealership in Nevada. It was called Uniprime Capital Acceptance. And I remember this very vividly because I was on the message boards at the time. It was a penny stock maybe you traded trading. I was. They they put out a press release that said they had a cure for AIDS. A car dealership in Nevada, Like someone we've worked with or if we licensed this thing from a scientist. They just straight up we have a cure for AIDS, and you know, even in the craziest times, like that's kind of a skeptical belief, but enough people believed that that the stocks surged, it doubled, and then it doubled again because just on the possibility that maybe a car dealership in Nevada had found a cure for AIDS. People were so optimistic of everything that it seemed not a unbelievable And people talk about the internet stocks, anything that was that breathed on the Internet, people going crazy for One of my favorite facts is the fact that k Tell, the company that makes really cheesy compilation CDs of like seventies DISCOMs, they sold their CDs online, Big whoop. The stock grew tenfold at one point, and then over the span of a few months, people were losing their minds. And then the other fact that I love is the fact that the Segue that you know, didn't really take off, but people still go tours around. People really thought entire cities were going to be redesigned because of how the Segue got people around. So basically it was a time of just incredible optimism about everything. So, Zach, I'm curious in your book you quote a lot from existing, you know, economic and financial literature. You quote people like Robert Schiller on the optimism that precedes bubbles when it comes to beanie babies. If you could kind of pinpoint one thing that flipped it into speculative mania, what would it be. It's people seeing prices rise. That that is what drives what drives speculative bubbles, is that as soon as there's you know, this insignificant phenomenon of someone who's trying to complete a set for their kid, as soon as they pay a hundred dollars for a beanie baby that someone paid five dollars for, that's what sets in motion. Or these can set in motions certainly this kind of chain, because that becomes a story. And beanie babies, and I think all bubbles are spread by by narrative, by people saying I bought this beanie baby for five dollars and sold it for a hundred. Anyone who did that told a thousand people about it because it was so weird, So hum big did it get in the end? Is there an estimate of what the total outstanding value of beanie babies was at the TIS annual sales peaked It around one point five billion dollars um and that was just wholesale other people who there must be but have a bunch and held it all the way down and now just they live in a hou filled with it. There is a retired soap opera star in Arizzona. I think I remember what's been so long as I talked to him. Um, there's a retired soap opera star who lost his kids six figure college funds on them and has like thirty thousand of them still in his home. That's we talked about how these sort of bubbles began, at least in the case of beanie babies, how did it end, because it did start to fizzle out in and within a couple of years the secondary market value of thousands millions of stuffed animals was gone. This was one of the funniest things about the reporting on this, and I think there's a lot of very similar stuff with the reporting on the housing bubble and the Internet stock bubble, is that I would kind of pose this question to the collectors anti executives about kind of how this thing had ended, and they all had these really specific explanations for it, these kind of linear cause and effect things, you know, like you know, there was one saying, oh, you know, the counterfeits really invaded the market and people were paying you know, six hundred dollars and if it hadn't for pieces they trying to be fake, and if it hadn't been for all the fraud this, you know, it wouldn't have ended that way. A lot of people felt, you know, Ty got greedy and made too many, too many styles, um and and and and overproduce them. And I'm like, okay, you know, maybe kind of, but you know, if he hadn't done that, then being would they still be ten per cent and B B based sales and we'd all be rich. I Mean, these things end because they're stupid, right, Like that's ultimately they're they're unsustainable, and eventually there is something that nixed them and causes that kind of the kind of cascade of confidence that started it to just crescendo down and and that's what happened. Um, there's this thing. At the end of nine. Everything is still basically going well. Secondary market sales still good, top pieces still valuable, some overproduction on some of the newer pieces, those are stacking up a little bit, but basically still a strong market. No one's saying this things ending, collectors still confident, magazine still selling, and Tie announces at the end of that on that on January one, all of the Beanie Babies will be retired. Whoa, and that they won't be made anymore. Theoretically, prices should have gone through the roof at that point for a minute. Yeah, um, they did for a minute, and people were very excited, and people like, what's going on? This is going to do a different product and uh. And then he announced that he would do a vote to raise money for AIDS on whether people wanted to Beanie Babies to continue, and you would log in and online and don't and donate that there was some other stuff going on in his life, but where you could donate a dollar forty nine. I think it was to vote on whether Beanie Babies should be continued. First, I'll raise the question of who would spend a dollar fifty to vote to end Beanie Babies. We're not kind of like. But so he does this and almost no one does voted, ended up time to donate all the money himself because he hadn't gotten so many votes as he had claimed he had, and announced that Beanie Babies would be continued and that all the new releases, there would be all these new millennium collection coming out and no one cared, and the whole thing just every month after that, the sales collapsed and people started to that cause your crisis of confidence about the and then what causes and then what happened was so these were tire beanie babies. I remember talking to one of the first collectors who was under way back from speaking in a beanie baby convention as a paid expert, you know, like a keynote speaker on beanie babies, and she was at the O'Hare airport and she saw a stack of beanie babies. There were still five dollars in the store, but we're retired, and this was like mind blow. I mean, people thought it was a law of physics that a retired beanie baby was worth more than five dollars and that that was just true. And uh, I mean, you know, kind of like you know, hoving prices don't go down. None of the models included that. None of their models include the idea that a retire beanie baby could conceivably still just be worth the retail price. So one of my favorite stings on Wall Street is that the only thing that's a bubble, well, something becomes a bubble once the bubble bursts. Anything else is a great trade, right he just made Tony. When you look around the world, it seems like we are continuously seeing warnings about bubbles again in tech, lots of other areas and financial markets. Having studied, uh, the science of stuffed animals, do you have any wisdom for how we can spot bubbles before they burst and before they burst? Yeah, I mean, you know, I think the thing, just behaviorally is that when wood is driving, it is entirely stories about how much money people have been making on it. That's something to be really concerned about. And I think any time you have a kind of surge of interest in new entrants into a field based on sort of past successes of other ones. There was a ton of that with the Internet bubble. You had legitimate companies, we go public first, and then the next one you know, this is gonna be the next that and that was a piece of crap. So I think I think those are you know, anytime you see well to me, you know, to bring your point to the current era. You know, we've been hearing about a possible tech bubble for the last ten years. I mean, when Facebook was valued at a billion dollars, people said tech bubble, and now it's worth hundreds of times hundreds of times that. But I did see an add on Instagram this week that like was promising how to make your billion dollar app, like a service that would teach people how to make an app that would be worth a billion dollars. And that reminds me of like telling stories just about the money. It's like it is the next level of the euphoria. I always love those like JP Morgan shoeshine bubbie stories about bubble. So I think, I mean, I remember when I was in high school, my bus driver and this was dangerous because he was driving a bus full of kids and he had to cell phones and he was slipping houses while he was driving talking to his like real estate ass and his manager at I just so I always look for things like that, and im when that year at a summer job, we'd go to the pizza place and they would also while it was just a little pizza shop, and they would also have a rival financial network to Bloomberg on TV all the time. And you know, I think the pizza. You know, that was what the pizza guys were watching was CNBC Wow, rival network. Well, said Joe, you actually managed to make some money from internet stocks. How did you time it? Because it seems like the timing is key here. Lots of people did get rich off beanie babies and lots of people got really poor. It was really it was the best luck I've ever had. I was trading through UM the basically Christmas break of two thousand and or anyway two thousand and then I UM had to study. I studied abroad in Switzerland, and the ring of two thousand and before I left UM, I sold all my stocks because like, I'm not going to be able to trade while I'm studying abroad. That it didn't seem plausible. And then the bubble birth while I was studying abroad, So out of pure luck with no insight, you need to craft that into a narrative about your own foresight. No, it was just the opposite. That's just pure luck. I just happened to sell like a couple of months before the peak, so that that worked out well, all right, So you made thousands off internet stocks and I made two bucks from a single beanie baby, but you got to cuddle it, so that's okay. I'm not sure. Um, all right, Zach, it was lovely having you on the show. Thank you so much. It's great. Thank you all right, Joe, We just had a really interesting, entertaining conversation. What did you learn? I actually think my favorite single fact was that point about the magazine and the relationship between seeing prices written down and seeing prices move and then the effect that has on actual prices. I think that's a fascinating point, right. I just love the idea that this group of soccer moms in Chicago became a market and Tycoons and I have thought about that before, this idea of their being there needing to be a complete set of them, um, and so it sort of creates this inherent scarcity to them that drives up demand. That was an aspect of the beanie baby boom that I had not realized before. All Right, Well, artificial scarcity is a hot topic in economics right now. Maybe that's something for another podcast. This is Tracy Alloway. You can find me at Tracy Alloway on Twitter and I'm Joe Wisnthal. Find me at The Stalwart on Twitter and If you want to follow Zack, he's on Twitter too at Zach Pissinet. And thank you for listening to Odd Lots. Tune in next time. O