Remember when Beanie Babies were all the rage? How did that turn out? Think twice before jumping on business trends or the "next big thing".
Remember when Beanie Babies were all the rage? That was over 15 years ago, so it may be hard to imagine how people went absolutely bonkers over plush stuffed animals not just as collector toys, but as a business investment.
Until, all at once, they didn’t.
Slate points out how people bought and sold rare Beanie Babies for as much as $5,000 with expectation of ever-increasing value. Beanie Babies weren’t just a fad like hula hoops or pet rocks, they were a mass mania.
As was, perhaps not coincidentally, the eagerness to pour money into start-up companies that didn’t have an actual product or a business plan other than “something to do with the Internet.” That resulted in something called the dot-com bust.
Underlying the irrational exuberance of both Beanie Baby and dot-com wackiness were the old tricks of market manipulation and shady business practices. They preyed on the phenomenon of “collective hallucination” in which a majority of people buy into an idea without regard for rational analysis.
Such “phantastic” thinking, as two economists term it, regards a new and exciting object as an almost magical means to riches or personal fulfillment. But as this thinking spreads from a small group (toy collectors, Internet investors) to a mass phenomenon, it eventually loses its magic. The bubble bursts and the value of the object (Beanie Baby, a dot-com company) plummets from nearly immeasurable to less than nothing.
Related Article: Should Your Business Accept Bitcoin?
Bitcoin: Business Trend or Bubble?
Not too long ago, the digital currency Bitcoin seemed on the verge of becoming the next commanding business trend. Social entrepreneur Wences Casares has said Bitcoin may be the best form of money seen in the history of civilization. Such hyperbole might at first glance seem to be “phantastical” thinking, especially in the wake of last year’s spectacular implosion of former industry leading Bitcoin exchange Mt. Gox.
Bitcoin, unlike Beanie Babies, is far from a fad, however. Both Casares and LinkedIn Influencer Joichi Ito draw parallels to the early days of the Internet to explain why Bitcoin may still be the next big thing, recent stumbling notwithstanding. The Internet didn’t take off as a dominant mass communications medium until there was an infrastructure with “killer apps” (e.g., the World Wide Web standard, web browsers, Google, smartphones) that made it accessible beyond the technical cognoscenti. Bitcoin has the potential to redefine banking and financial transactions just as the Internet has come to redefine, well, just about everything.
Many observers, such as CNBC, have argued that Bitcoin is doomed because the financial system largely does not recognize it as real currency. Others, like Bloomberg, maintain that Bitcoin still has value as an alternate payment system, albeit perhaps only with niche appeal.
The parallels with the early Internet are worth noting. Just as a lot of unfulfilled promises, not to mention hot air and blown smoke, caused the dot-com bubble to burst, it’s possible that the Mt. Gox and related debacles puts Bitcoin in the same situation. Only time will tell if, after a severe shakeout, Bitcoin can replicate the recovery of the Internet to become a similar juggernaut in the financial industry.
SMBs might want to cautiously investigate ways of accepting Bitcoin transactions, but the value in that might have more to do with good marketing than good accounting, as Money points out. No matter what you do, before jumping on Bitcoin or any other “next big thing,” maintain cautious skepticism while keeping an open mindedness. If you ever once really coveted a Beanie Baby, remember why you don’t now.