Charlie Owen - Beanie Babies and Viagra: A Story of Two “Happy Accidents”

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 in the respective niches they entered (consumer perception of tawdriness of impotence remedies, marketing a $5 toy as a priceless investment). There were shenanigans on both sides, but who doesn’t enjoy a little shenanigan here and there. Pfizer, in order for doctors to be able to sell to basically any male, created rules for the diagnosis of ED that were far broader than they initially were. Pfizer provided monetary and legal incentives for research spokespeople to provide data to expand diagnostic criterion for ED, and to make public appearances to build awareness for ED while not disclosing their affiliation with Pfizer. Similarly, Ty had to maintain its outward brand communications as a product for kids, while at the same time, covertly planting and nurturing seeds in the adult collector market through structured incentives for evangelist collectors and retailers.

Ty Warner is often referred to as the “Steve Jobs of Plush”. Steve Jobs himself once admitted, “If you look closely, most overnight successes took a long time”. Warner and his employees worked extremely hard for a very long time for the “overnight success” of Beanie Babies to happen. Although there is often an unexpected eureka moment in any discovery activity, the discovery is the first small step in the process and not sufficient for success. The challenge is keeping your eyes open for these opportunities and knowing the right way to execute. I’ve learned to be wary of happy accident stories, they can hide the true geniuses behind them. More importantly, they hide the enormous, and crucial pain and labor of execution and marketing to birth, nurture, protect, and grow, a powerless, vulnerable, and entirely dependent discovery toward the path to greatness. Ty, as a startup, was able to achieve a success on the same scale as Pfizer - remarkable does not even begin to describe the scope of this achievement. Maybe, the “Happy Accidents” we need right now are already there. Maybe we just need to open our eyes and pounce. But what do I know? I’m not a doctor. Let’s ask Freud, “Idk. That’s all folks, the end” —Freud.