This month Econ Extra Credit is taking a look at speculative investment bubbles with some help from Beanie Babies. We’re watching the film “Beanie Mania” from 2021. Subscribe here to get the whole series in your inbox.
There was a time when people truly believed that their Beanie Baby collections would pay for their kid’s college tuition or their own retirement. It was based on solid numbers; in the 1990s, a single plush animal bought for $5 at retail stores could be resold on eBay for hundreds, sometimes thousands of dollars.
Ty Inc. was expert at creating a sense of scarcity in the market. Researchers have found that emphasizing a product’s scarcity can help raise the perceived value and push consumers to buy the product before others can. That’s the psychological principle that the company exploited by “retiring” older Beanies, stopping production of them before the company introduced new Beanies to their lineup.
“What Ty [Warner] counted on was people wouldn’t just buy one. They would buy as many as they could get of any one of them and hoard them,” said antiques and collectibles expert Harry Rinker.
“But after three or four years, people got tired of hoarding them and started dumping them on the secondary market. [That prompted] the secondary market to collapse.”
Even at the height of the Beanie Baby bubble, Rinker warned against investing in the toys. His vocal pessimism gave him the nickname “Beanie Meanie,” but his caution applies to all collectibles.
“I always looked for economic trends … that applied to my trade, and one of them was that you can’t make money out of nothing,” Rinker told “Marketplace Morning Report” host David Brancaccio.
“So, I created a rule in the antique trade called Rinker’s 30 Years Rule: For the first 30 years of anything’s life, all its value is speculative.”
When frenzies begin, it’s as if markets defy gravity with prices that keep rising. But in hindsight, asset bubbles seem obvious, because like gravity, what goes up must come down. A collectible’s value will not infinitely increase.
So rather than focusing on a collectible object’s monetary value, Rinker advocates focusing on the memories and emotional value that the object holds.
“A true collector … he dies with his stuff,” Rinker said. “It’s never about the money.”
Drops and hypebeasts
Scarcity remains a compelling strategy for brands to motivate consumers. One company in particular that stands out for its success is streetwear clothing brand Supreme. Once a small skate shop in New York City, the brand was worth more than $2 billion in 2020.
Supreme has generated hype by releasing or “dropping” limited-run products once a week, many of which would sell out in a matter of seconds. With only a few customers able to buy the new goods, Supreme got even more buzz from lucrative secondary markets, where products were resold with as much as a 1,000% markup. In recent years, however, Supreme has struggled to maintain that level of enthusiasm. Some of Supreme’s biggest fans — aka hypebeasts — suspect that the number of items manufactured for each limited release has increased. Their ability to instantly flip Supreme products for extreme profits has subsided.
Not all brands though are interested in fueling secondary markets. Pokémon card collectors’ dreams of profiting off a severe card shortage were cut short when the company ramped up production, making 9 billion new cards in 2022.
What do you think will be the next collectible bubble to burst?
Send us your thoughts by replying to this email or sending a note to extracredit@marketplace.org.
“Beanie Mania” is available to stream on Max with a subscription. Later in the month, we’ll be talking about the new movie dramatizing this phenomenon, “The Beanie Bubble,” which is available to stream on Apple TV+ with a subscription.
After you watch, send us your thoughts and questions at extracredit@marketplace.org or reply to this email!
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