BEAR MARKET: For awhile in the mid-’90s, the purple Princess Diana bear was the Holy Grail of Beanie Babies. They regularly sold among collectors for upward of $300. Now, most of them are worth just a few bucks.
Spilling the Beans on Ty Warner’s Toys and Troubles
New Book Explores Mysterious Montecito Mogul and His Stuffed Animal Craze
Thursday, March 26, 2015
A few weeks ago, H. Ty Warner walked into Your Remnant Store in downtown Santa Barbara. The small shop’s new owners and their weekend customers snapped to attention.
There was no entourage or security detail, just a quiet, 70-year-old toymaker obsessed with fabric. But he commanded a presence available only to titans of industry who’ve cultivated their wealth as carefully as their mystique. When he was young, Warner, now worth more than $2.5 billion, read a biography of Howard Hughes and decided he wanted to earn and live like the reclusive tycoon.
As he sifted through bolts of paisley and plush with the same perfectionist scrutiny he gave to the Beanie Babies that made him rich — maybe this time choosing upholstery for the Montecito hotels he owns and sometimes micromanages, or the nearby $200 million estate he routinely remodels — Warner was approached by Hillary Hauser.
Hauser shook his hand and thanked him for giving so generously to Heal the Ocean, her environmental nonprofit. Motivated either by a true desire to protect Santa Barbara’s waters or by a more self-serving need for public support as he fought for development permits, Warner had donated to Heal the Ocean more than once in some of his few acts of philanthropy on the South Coast.
Warner was friendly to Hauser in return but kept the conversation brief. He explained he had to “check with his wife” before buying anything. Warner then continued down the narrow aisles, gently feeling samples between his thumb and forefinger and squinting at price tags through tortoiseshell glasses. Soon after, he would stop by the Biltmore Hotel he bought for $150 million to personally check on the gift-shop display of his newer Beanie Boo line.
The downtown errand was unremarkable in a lot of ways. But it was curious and illustrative in others. It proves old habits die hard, that the image of Warner agonizing over fabric swatches as he created his first Beanie Babies in 1993 hasn’t completely faded from reality. It shows the man, notoriously tightfisted as head of what’s still the biggest plush-toy company in the world — and who also owns the Coral Casino, San Ysidro Ranch, Sandpiper Golf Course, and the Montecito Country Club — still can’t pass up a good deal. And it raises some gossipy questions about his personal life because he has a strange habit of referring to his girlfriends as his wives when he’s never been married.
While Montecito’s Willy Wonka of stuffed animals spends more time away from his Chicago home and in his South Coast mansion, a long-awaited book published this month offers mesmerizing insight into his life, his business, and his role in the speculative hysteria of the Beanie Baby boom and bust that 20 years ago mutated a harmless kids’ toy into an overwrought currency of gullibility and greed.
By Paul Wellman
Stuffed with Curiosity
In The Great Beanie Baby Bubble: Mass Delusion and the Dark Side of Cute, Zac Bissonnette gets to the bottom of how consumer psychology and market anomalies conspired to persuade otherwise sane people that buying $5 beanbags mass-produced in China for $10,000 each would be a smart investment. He started researching the book during his junior year in college in 2010 as the country was emerging from the collapsed housing bubble. Already a New York Times best-selling author, he’s written two other financial books.
Bissonnette traces the Beanie fad from its beginnings among Chicago homemakers to its peak when the toys accounted for 10 percent of all eBay sales. He includes early stories of collectors pulling in hefty sums with rare and “retired” Beanie Babies, and how others too late to the game blew their kids’ college savings on a product that’s now practically worthless.
One chapter talks of a man driven to murder over a Beanie deal gone bad. Another describes a North Carolina father and daughter who still live among thousands of plush fish, lizards, unicorns, and bears with a plan to one day open a Ty Inc. museum attached to a McDonald’s.
Pouch the Kangaroo
Looking back, many of the Beanie acolytes remember the thrill of the hunt, the gambler’s high they chased as they waited in long lines and camped out at stores to grab the next “valuable” piece. Few could accept the inevitably of the 2000 crash from oversaturation, bad business moves, and new hot toys like Pokémon and Magic cards.
Perhaps most remarkable is what Bissonnette discovered about the genesis of the little animals and the tricks Warner and his company pulled to create buzz and demand. A brilliant salesman totally consumed with creating the perfect toy — “Even perfection has room for improvement,” he would say — Warner had the simple but inspired idea to move away from traditionally rigid stuffed animals and make something more floppy and cuddly. He then put plastic pellets in his under-stuffed handiwork to make them “poseable,” which gave them more personality and an undeniable charm that spoke to children.
The rarity phenomenon arose partly from Warner’s excessive nit-picking. Whole batches of Beanies would be released then quickly recalled because the boss would find something he wanted to change, whether it was a color, a fabric, or a stitch. Those that did make it to the shelves immediately became collector’s items, their heart-shaped tags encased in plastic protectors and the animals locked in Lucite containers well out of the reach of children.
LOST YOUTH: Though he has marketed to kids his entire career, Ty Warner almost never interacts with his young customers.
The “buy now or never” scheme was also cultivated by an ever-changing product line — called a “rolling mix,” Bissonnette explains — to keep consumers guessing and always hungry for more. Cryptic riddles about upcoming “retirements” posted on Ty Inc.’s website only added to the furor.
But before he dives into the nuances of Ty Inc.’s commercial strategies and how a ticking time bomb of a secondary market was fueled by amateur trade magazines, rumor mills, an overexcited media, and the rise of the Internet, Bissonnette takes a hard look at Warner himself.
It was tricky to get a clear portrait. Warner hasn’t granted an interview since a 1996 sit-down with People magazine when he fed the reporter a bunch of half-truths. He wouldn’t talk to Bissonnette (his reps didn’t respond to this paper, either), so the author spoke with former Ty Inc. executives, sales staff, retailers, family, and friends, to the extent Warner has friends.
Warner — named after the great and famously mean Detroit baseball player Ty Cobb — is painted on one hand as a lonesome, sensitive misfit racked by the lifelong pain of a horribly dysfunctional childhood. The word “sad” comes up often. Though he grew up in an upper-middle-class Chicago suburb, Warner’s parents did not create a cheerful household, Bissonnette found.
Much was made of the “unhappy” upbringing Warner’s lawyers obliquely referred to last year in his $100 million tax-evasion case. Critics claimed the admission was just a hollow sympathy play as his attorneys successfully argued Warner’s sentence down from prison time to a $53.5 million civil penalty, community service, and probation.
Yet Bissonnette writes about how Warner’s mother suffered from paranoid schizophrenia. His sister, Joy, reportedly awoke one night to see their mom hovering over her with a butcher’s knife. Warner and his father, who gave Ty his start in the toy industry after he dropped out of college, often dated the same women. Joy confided in Bissonnette that her father repeatedly molested her.
“I truly believe that he has the heart of a kid who was harmed by his mom’s psycho crap,” a former Ty Inc. executive told Bissonnette. “That’s where I always thought that he had a soft spot. He never really had a childhood. He’s got that, like, Michael Jackson syndrome. He’s a really sensitive guy, but he’s got so much damage.” Similar to Jackson, Warner has undergone countless plastic surgeries that have rendered his face taut and doll-like. He styles his hair in a sort of mullet to hide his many incision scars.
On the other hand, and in objective terms, Warner also comes across in the book as a selfish, arrogant tyrant. While he treated his lower-level employees fairly well — Bissonnette writes about how, in 1998, Warner gave all his workers Christmas bonuses equal to their annual salaries — he was borderline cruel to some of Ty Inc.’s higher-ups and other people he did business with. He allegedly took credit for ideas that weren’t his and work he never did.
And his personal life is littered with broken relationships and estrangements as he valued an opulent existence above all else. In 1996, the same year Warner squirreled $100 million overseas and away from the IRS, he went back on a promise to build his sister a much-needed $100,000 home because he “couldn’t afford it,” Bissonnette wrote. He also declined to help her with her hip surgery, “instead advising her to turn to the seven children she’d raised with a former husband, none of whom Warner had ever met.”
Through all his research and writing, however, Bissonnette never took a dim view of one of the richest men in America. “I couldn’t tell if it was Stockholm syndrome for me, but I absolutely view him as a spectacular talent,” Bissonnette told me last week. “I see him as sympathetic, and I certainly don’t have any negative feelings toward him.”
In an hour-long conversation, Bissonnette, who works at a hedge-fund research firm in New York, talked about how he got hooked on the Beanie topic, why he’s so interested in speculative bubbles, what he thinks about Warner’s court case and real estate investments, and if he’s concerned about getting sued. Here’s an edited version of our talk:
As you know, Ty Warner and his legal team are super litigious. Worried? I’ve gotten no indication that Ty cares at all about the book. And that was true while I was working on it. I got one very nice letter from his lawyer telling me that Ty was very protective of trade secrets, and that’s why they enforce their nondisclosure [agreements]. And they said while they had no reason to think I was seeking trade secrets, I should know employees might not want to talk to me because of that, and I should understand that. That was the only communication of any substance I had with them.
Why chase down the Beanie Baby story? It was really about trying to understand what the process was — to the extent you can ever understand these things — behind how people came to view these beanbag animals as an investment. And how the hell people would have possibly thought they were going to go up in value. People ask, why did the Beanie Baby craze crash? Because it was stupid. Then there’s the elaborate story people string together to make themselves feel better. The book is really a window into speculative bubbles because I’ve always been obsessed with them.
How come? I think the idea of a mass hysteria, even outside of the financial space, is fascinating — how does something like the rise of Hitler happen? These crowd madnesses of people collectively losing their minds are just incredible. Then it was trying to comprehend why it specifically happened with Beanie Babies. Because people point to Cabbage Patch Kids and other products and say, “Who knows why anything happens?” But no, there were a bunch of things about Beanie Babies that really were different.
Do you see any toys or products now and think to yourself, “Jesus, this could be the next Beanie Baby”? The thing that jumps out at me is Bitcoin, in that you had all this interest being fueled by the run-up. And that really is the definition of when something becomes a bubble. Robert Shiller has written a spectacular book called Irrational Exuberance, where he defines a speculative bubble as a time when people are essentially lured in by the stories of other people making money. And the Beanie Babies were 1,000 percent that. That’s what it was. It was these stories of Peanut the Royal Blue Elephant selling for $4,000.
As a member of the media, I was particularly interested and freaked out by how those reports — and I know many of them weren’t accurate — played a big part in starting the craze. Yes! Speculative bubbles don’t start happening until there’s a media. But in terms of anything like that happening now with toys, I think in a way — and people in the toy industry have told me this — that the Beanie craze was so huge and exploded so spectacularly that it will be hard for anything like that to happen again for two reasons.
PLUSH WITH PERSONALITY: Every type of Beanie Baby had a name and a poem in its heart-shaped “Ty” tag. This is Puffer the Puffin.
First, I think people will see the comparison and say, “I’m not falling for that again.” Second, Beanie Babies really gained critical mass before eBay. And now that you have markets that are so connected, it’s hard for stuff to seem rare when it isn’t. There will be micro versions of it among collectors — Build-A-Bears and My Little Ponies sell for inflated prices — but I don’t think there will be another consumer product that everyone hoards for investment and that turns someone into a billionaire.