The following is based on and inspired by the books The Great Beanie Baby Bubble: Mass Delusion and the Dark Side of Cute by Zac Bissonnette and The Rise of Viagra: How the Little Blue Pill Changed Sex in America by Meika Loe
Sigmund Freud, the famous psychologist, wrote in 1908, “People hoard random stuff because they’re so damn horny all the time”. The Beanie Baby Bubble burst in 1998. Viagra was introduced in 1998. Coincidence?
There are often unplanned eureka moments in any discovery activity. The trick is in keeping your eyes open and knowing how to pounce. Overnight successes require lots of work. Two products were conceived at the same time, 1992, but born on different dates. As one would go to pharmacies to be born, the other would go to pharmacies to die. This article tells the story of the Beanie Birds and the Beanie Bees; the happy accidents of Viagra and Beanie Babies.
In 1992, in Sandwich England, after a safety trial for the drug sildenafil, a medication intended to increase blood flow to the hearts of patients with angina, a clinician at Pfizer’s research headquarters reported to his supervisor that the drug was ineffective. He then proceeded to enumerate a long list of adverse side effects. At the end of this list, he added, “Oh, and there are reports of penile erections”. In this version of the story, “Eureka!” was shortly followed by “Voila! Viagra!”. An accidental discovery by Pfizer led to the creation of a medicine that would go on to help millions of couples suffering from the effects of erectile dysfunction.
However, the real story is much messier… of course. Happy accident stories are over-simplified and often used to further marketing and strategic objectives. Here’s a more accurate, yet still oversimplified version of the story: “After several years of failing to find penile pills for impotent men, Pfizer eventually, from their ‘garbage can of failed drugs’, found a pill that would make men erect. Pfizer then worked another six years to launch and brand the product to differentiate it from the many bogus impotence remedies on the market”. Compare this account to the sanitized story I told in the previous paragraph. Which story do you like better? Yeah, I like the first version better too.
Also in 1992, while Pfizer was gradually uncovering its “happy accident”, across the ocean, Ty Warner began work on a line of plush toys in the $5 range at Ty’s headquarters in Oak Brook Illinois. Only six years after founding Ty, Inc., Warner reportedly saw the line as a means to an end. Beanie Babies were small, inexpensive items he could easily carry with him to trade shows to get a foot in the door with retailers whom he could then upsell on a larger line of plush. Warner later noted on his initial creation of Beanie Babies, “At that time, there wasn’t anything in the $5 range that I wouldn’t consider real garbage”. Some Beanie Babies would go on to be valued at hundreds of thousands of dollars.
Eureka! Voila! Beanie Babies! Right? Not quite. In the first year, Beanie Babies did not move. Warner once said, “if you know in your heart it is a good idea, don’t give up or compromise it. Before I started the Beanie Baby line, the industry rule was that a $5 collectable item could not work”. In the same vein, Jeff Bezos said, “If you’re going to take bold bets, they’re going to be experiments…But a few big successes compensate for dozens and dozens of things that didn’t work”. Instead of ditching the line, Warner boldly doubled down and introduced several more Beanie Babies. After three years of continued failures with the Beanie Baby line, Warner did not give up and diligently conducted numerous experiments intentionally retiring products. Driven by an insatiable desire to create the perfect toy, Warner continually modified each of his Beanie Baby designs.
In 1996, the first few collectors of Beanie Babies were slowly emerging in Naperville Illinois, a thirty-minute drive southwest from Ty’s headquarters in Oak Brook. Meanwhile, thirty minutes northeast of Ty’s headquarters, collectibles dealer Richard Gernady was introduced to Beanie Babies by children at his collectibles store. Gernady, before there was a market, highlighted Beanies as a ground-floor investment opportunity.
Eureka! Voila! Beanie Babies! Right? Not quite yet. Through Ty’s continued and effortful facilitation of natural incentives, the handful of collectors began to grow. When the early adopters of Beanie collecting called Ty to ask about retired pieces, Ty referred them to Gernady. Gernady soon became the expert on Beanie Babies and their investment value and introduced the collectors to checklists. As the early adopters collected, the value of their collections increased as they published subjective information on the fluctuating values and availability of Beanie Babies. Moreover, by reaching out to others looking for rare pieces, they encouraged others to collect. As more collectors were added, values of rare pieces increased. Gradually, collectors organically formed a multi-level marketing operation in many ways similar to Amway. Boom, the overnight success is realized!
The truth is, both products were years in the making and took an enormous amount of planning, execution, and marketing to make a reality. They were not “one-night stand” happy accidents. Both had initially a narrowly defined target audience (Beanies - buyers of inexpensive plush animals as gifts and kids themselves, Viagra - people with the most severe forms of ED). Both products achieved a massive repositioning and desirability for a much wider audience with lots of time and effort (Beanies as tangible and simple speculative investment alternatives to internet stocks, Viagra as a cure for any penile-related underperformance). Both had huge obstacles