Beanie Babies (1995 – 2000)
Collectible children’s toys generated a speculative craze in the 1990s. Beanie Babies were plastic pellet-filled teddy animals. They were designed by Ty Inc, an American toy maker, and initially targeted to youngsters. They rapidly become speculative adult collectibles. Rare Beanie Babies traded for ten times their retail value on sites like eBay. At eBay’s IPO, 25% of auction transactions featured Beanie Baby sales, influencing the dot-com bubble. The convergence of these events created a speculative mania in which Beanie Babies were traded as a speculative commodity, with the primary demand being to flip them to a larger fool for a higher price. Some rare or limited Beanie Babies sold for $20,000-$30,000 at the height of the craze. Beanie frenzy distributors recognized human psychology, behavioral economics, and creating artificial scarcity on speculative products. By generating fluctuating scarcity among the toys, the firm could drive buyers to buy bulk plush toys to complete their collections. Beanie Babies buyers couldn’t find the entire collection in one location, and the artificially limited availability made it seem like the toys were selling out. By limiting distribution channels, producing the toys as part of a bigger collection, and creating changeable artificial scarcity, the company bootstrapped a collector item based on a little children’s toy with minimal inherent value — Much like the crypto market for non-fungible tokens (NFTs) today. By 2000, Beanie Baby speculation had subsided. The communal idea that plush children’s toys were a path to affluence became ludicrous in the popular perception. The corporation began to retire certain lines of toys, self-deal in its own merchandise, and engage in other questionable actions that appeared to be market manipulation. Toy speculators felt they were being manipulated for insiders’ gain. The company’s actions alienated its fans, destroying the idea of easy prosperity. Fad-driven collectibles have never been a good investment. The cycle of cultural deprecation extends from tulips to stamps to Pokémon cards. While nostalgic for some, these things have never been a good long-term investment due to their fading cultural relevance. All save the most essential cultural items have a negative investment return. Artificial scarcity as a commercial venture decreases the cultural importance of artifacts because their value is based on speculation for short-term profits. Beanie Babies are a flash-in-the-pan fad whose artificial scarcity and unreasonable desire lost cultural importance. Momentum based on non-economic companies is unsustainable on long-term scales.