Speaker 1: The hottest shoe trend is less about fashion and more about function.
Speaker 2: Get ready to rock your Crocs.
Speaker 3: They're wildly popular.
Speaker 4: Fidget spinners seem to be all the rage.
Speaker 5: The skyrocketing prices for digital art sold as NFTs, or non-fungible tokens …
Speaker 6: It's the newest trend in menswear. This is the male version of the romper.
Speaker 7: The ice-bucket craze reached a crescendo this week. The fad started last June among professional …
Katy Milkman: It seems like every year there's a new and often strange toy trend, and every season brings a new fashion trend that's a little wackier than the last. I still can't figure out why I ever loved scrunchies. Fads in fitness, health, tech, music, and commerce are popping up all the time, too, but what is it about human nature that helps some products, services, and ideas take off like rockets? In this episode, we'll look at how our psychology can cause early trends to snowball, and how noticing even a small uptick or downturn in the popularity of a niche product or behavior can influence our decisions.
I'm Dr. Katy Milkman, and this is Choiceology, an original podcast from Charles Schwab. It's a show about the psychology and economics behind our decisions. We bring you true stories, illuminating predictable quirks of human behavior that can help or hinder you, and then we examine the latest research in behavioral science. We do it all to help you make better judgments and avoid costly mistakes.
Yemisi Brookes: This story begins in a suburb called Naperville, which is just outside of Chicago.
Katy Milkman: This is Yemisi.
Yemisi Brookes: Hi, my name is Yemisi Brookes.
Katy Milkman: Yemisi is a documentary director. Her latest project is about a phenomenon from the early 1990s.
Yemisi Brookes: There was a cul-de-sac in Naperville called Colorado Court, and in the '90s this felt like a very lovely place to be as I understand it.
Katy Milkman: Colorado Court was a typical suburban cul-de-sac with a nice community of friends and families. There were barbecues and play dates and parents carpooling kids to soccer games. Colorado Court was also ground zero for one of the biggest toy trends in history.
Yemisi Brookes: It begins with a couple of the women who just had discovered these little beanie toys. And so they're tiny little teddy bears, although they are actually all different animals. They fit in the palm of your hand, and they would retail about five dollars. So they were the perfect price for you to be able to afford one if you were a kid. And they were being sold not in big box stores, but they're being sold in gift shops and smaller independent shops.
Katy Milkman: Beanie Babies were cute beanbag toys made by the Ty corporation. That's the company that's led by the reclusive Ty Warner, a man who has been compared to the Wizard of Oz and Willy Wonka. Ty Inc. created several different versions of the toys in the early days, including Legs the frog, Flash the dolphin, and Pinchers the lobster.
Yemisi Brookes: A couple of the mums had seen these toys, and I think it became the sort of thing to do on a Friday. The kid would get their pocket money, and they maybe might say to another kid that lived in another part of the cul-de-sac, "Hey, do you want to come and buy these Beanie Babies?" So it just became a really lovely bonding experience to do with their kids. It became a fun thing to do.
Katy Milkman: One of those parents was Becky Phillips.
Yemisi Brookes: So Becky Phillips was one of the ladies that lived in the cul-de-sac in Colorado Court. She was a language arts teacher. She also had young kids.
Katy Milkman: Becky and some of her neighborhood friends were buying these toys for their children.
Yemisi Brookes: It began with just one or two gift shops, and then I guess what happens is your kids go consecutively for a few weeks, and they've bought all of the toys. And so then it's like, "Oh, I wonder which other stores might have them." And so this was very much part of the appeal, and I can just imagine how fun that would've been for a six- or seven-year-old because you feel like you're going on a treasure hunt.
Katy Milkman: As the kids started completing their collections, some of the parents also got interested in the toys.
Yemisi Brookes: The inflection point where it changes from kids to adult. So in the beginning, you were just driving your kids to get it, right, and you're like, "Oh, they haven't got it. Let's try somewhere else." And then it becomes the adult saying, "Maybe I want a little collection of my own."
Becky starts talking about just getting a phone book and just going through the phone book, but looking for toy stores in other cities and just calling toy stores. And then she calls the chamber of commerce in different places and starts saying, "Can you help me with this?"
Katy Milkman: What began as a few kids looking to find more toys morphed into a small group of parents and friends searching high and low for these stuffed animals. Things started to get serious for Becky and her Colorado Court friends. And as this small group became more enthusiastic, others they knew took note, and suddenly there was a growing list of fellow Beanie Baby collectors.
Yemisi Brookes: So Becky, being the super organized person that she is, started to formalize things. And so between some of the folks in the cul-de-sac, they would write things up, and things became a little bit more formal. From there, people started advertising in the classified sections of newspapers, and that became a way of trading almost. It was like, "Hey, I've got three of these, but I am seeking one of those." So that became a just quite rudimentary way to do things.
Katy Milkman: From a few classified ads, a trading market grew. Several of the parents and traders wrote price guidelines to help value the rarer toys. And because the Ty company did no press, these folks became the unofficial mouthpiece of Ty Beanie Babies, spreading the news far and wide about the phenomenon. Becky and her peers basically established a secondary market for trading these toys. This all coincided with a revolutionary new marketplace on the worldwide web.
Yemisi Brookes: EBay really became a way that the craze became accelerated. So in the beginning, it almost felt like a place where you could congregate, and you could find out about other Beanie Baby collectors in other states.
Katy Milkman: EBay and some early blogs showed people across the U.S. and around the world that there was a community of Beanie Baby collectors and enthusiasts. And eBay made it easy to see that this community was growing—fast.
Yemisi Brookes: In the mid-'90s, Beanie Baby sales alone accounted for a huge amount of eBay's business. EBay as a business would look very different if it wasn't for Beanie Babies, which is amazing when you think about it.
Katy Milkman: All of this happened organically. Becky and her friends and others had no idea that their love for collecting Beanie Babies would spread far beyond their little suburban neighborhood.
Yemisi Brookes: I don't think there was anything particularly premeditated. I think it really came out of "My kids love this. Let me drive them around. Oh. Actually, this is something that I love as well."
Katy Milkman: So it started small but grew very quickly over a short period of time. You could almost say it was contagious.
Yemisi Brookes: We interviewed someone who in the '90s owned a few gift shops in Canada, and he told us this amazing statistic, which is that his sales in 1996 from selling Beanie Babies were 2 million. His sales in 1997 were 23 million. So over just a year, and bear in mind that was the '90s as well, that was the amount of money that he, as a small, independent gift shop owner, could make. He could really make a lot of money.
Katy Milkman: Things on the secondary market were going crazy as well. The Ty company caused scarcity by regularly retiring certain variations of the toys. Every so often, they stopped production of certain lines, leading to a frenzied rush to scoop them up before they were gone from the stores, and the prices of these retired toys skyrocketed. They truly became collector's items.
Yemisi Brookes: It just became a completely different thing. The parents were like, "Do not touch them. They're going in plastic cases. These are not to be played with." Whereas before these Beanie Babies had lovely little lives, and they were tattered, and they were taken to playgrounds, and they were stuffed into book bags. But they became something very different.
Katy Milkman: Other businesses got in on the growing trend. McDonald's commissioned Ty to create a series of miniature toys they called Teeny Beanies to sell with their Happy Meals. Lines at the restaurants for these meals with Teeny Beanies spilled out onto the streets. And at one point, so did the toys.
Yemisi Brookes: Around the time of Beanie Babies going into McDonald's Happy Meals, there was a spillage from a McDonald's truck carrying Teeny Beanies. It happened on a five-lane highway, and there is helicopter footage of people driving in rush hour down a five-lane highway and slowing down to try and grab Beanie Babies.
Speaker 10: Oh my God. Guys, stop it. This is unbelievable.
Speaker 11: Several hundred little international bears headed to McDonald's dumped accidentally in the middle of five lanes of 285 rush hour traffic.
Yemisi Brookes: And it's the most … I mean, it looks like the most unsafe thing you have ever seen, but people were desperate. People were totally desperate.
Katy Milkman: The craze was getting crazy.
Yemisi Brookes: There were shipments of Beanie Babies that had to have police escorts. There were UPS men who were being stolen from, being jumped on their daily rounds. There's a very famous photograph of a couple in a divorce court on their hands and knees with … there were a big pile of Beanie Babies that are being separated, and they're choosing "This one for you. This one for me." There was a huge fake market. Huge amounts of Beanie Babies were being seized because they were fake coming into the country. So it really was like mania in every possible way.
Katy Milkman: That mania enabled some dodgy financial decisions. People started treating Beanie Babies as investments. The artificial scarcity of the retired toys caused people to pay top dollar and to assume that they would just get more valuable over time. Some people built their collections as college funds for their children. Unfortunately for them, it was a bubble—foreshadowed in this clip from Yemisi's HBO documentary called Beanie Mania.
Speaker 12: Everybody keeps going, "How long can it last?" And it's like forever.
Speaker 13: I don't see any end in sight to Beanie Babies at all.
Speaker 14: People get caught up in these crazes, and they think they're going to go on forever.
Speaker 15: This is here to stay.
Speaker 16: I don't think the Beanie craze will ever die.
Speaker 17: People think prices will continually rise to infinity.
Speaker 18: Six years after Ty introduced Beanie Babies and 253 versions later, these small stuffed animals are sagging on the secondary market.
Speaker 19: Three different guides show the values of many retired Beanies. Those no longer made have dropped considerably.
Yemisi Brookes: The bubble burst fairly quickly when you have people who paid hugely inflated prices for a collection of Beanie Babies, and they were worth nothing. There were so many people who have thought that they really were going to sell. They've heard these tales, which honestly, there were not that many people, but there were people who were really smart and sold really quickly and did maybe make enough for their son or daughter's college fund. But those people were few and far between.
Katy Milkman: Interestingly, the Ty corporation never deviated from the recommended retail price. The speculation all happened in the secondary market, as did the fallout. Fortunately for Becky Phillips and the other parents from Colorado Court, it wasn't too devastating.
Yemisi Brookes: After the prices had gone to a certain height, they were like, "OK, we're just done. The kids are grown up. We've made our money from it. That was a great time, but let's move on." They were very tightlipped about talking about how much money that they made, which I understand, and I respect, but let's be real. They made a lot of money.
We talk about these women as if they were just soccer mums trading 10 dollars here, 20. We are talking about thousands, if not millions in some cases, that these women were making off small, under-stuffed teddy bears, which retail about five dollars. These women were smart, and yet there is this idea of them as just the carpool mums or the soccer mums. No, they were leaving their jobs and flying internationally, appearing on international shows, appearing at trade fairs. They had their own magazines, and it was really lovely actually. Becky says, "It really felt like our moment. We almost felt like we were famous, and we were really doing something special."
Katy Milkman: Here's Becky Phillips from the documentary.
Becky Phillips: Sometimes you reflect on it, but you always go back to the beginning. Nobody really knows where all this started, but we do. It was just a little happy family, and that's what's most important to me, is the ones that I started out with know exactly what we did.
Yemisi Brookes: So I think it really gave them something as well. And I think for me, when you watch TV shows or films, how often do you see 60-year-old women talking about their business practices? It's just not something which we see and we celebrate. So for me to be able to give them a voice, even though they wouldn't tell me exactly how much they earned, but yeah, I just thought it was an interesting way to look at things.
Katy Milkman: The Ty corporation still sells Beanie Babies. As of this taping, there were over 80 versions to choose from, ranging in price from about six dollars to around 25. That's a far cry from the thousands that some people paid at the height of the Beanie Baby trend. The secondary market is now very modest. In fact, you can find many early Beanie Babies at steep discounts.
Yemisi Brookes: We wanted to shoot some B-roll with a load of Beanie Babies, and we didn't have any. And so one of the producers just went online to see, "How much do you think we'll have to pay for a whole set of Beanie Babies?" And we just found someone in Staten Island who was like, "Please come and take them off me for free." So certainly, they do not hold what they used to.
Katy Milkman: That said, these little stuffed toys still hold their appeal.
Yemisi Brookes: I'm just looking behind me. There's about 12 of them, which at some point will go, but for now, I'm like, "Oh, they are quite cute." So yeah. And so now my little girl, before she goes to bed, she chooses a different Beanie Baby to take to bed with her every night.
Katy Milkman: Yemisi Brookes is the director of Beanie Mania. You heard several clips from the documentary courtesy of HBO. You can find a link to the documentary in the show notes and at schwab.com/podcast.
The Beanie Baby story reveals a number of interesting phenomena. You can see how speculation and artificial scarcity can lead to some less-than-ideal financial decisions. But underlying this story is a pattern that we see in all sorts of domains, and it involves what a behavioral scientist would call a trending social norm, or an upward or downward sloping pattern in people's level of engagement with a product, idea, investment, or behavior.
It turns out that our behavior is strongly influenced by what we see other people doing, for better or for worse. Decades of research have demonstrated how eager we are to fit in by adopting popular behaviors. If the majority of our friends exercise, exercise appeals more to us. If the majority of our friends own a certain car, we worry we'll be left out if we don't get one too. But new research highlights that we don't just pay attention to what we see the majority of other people doing. We're strongly influenced by our peers even when we see just a small fraction of them engaging with a new behavior, product, investment, or idea if it's clear that the small fraction is on an upward trajectory. In short, we're immensely influenced by a growth in the interest or appeal of something even if it's still niche.
My next guest is an authority on influence, persuasion, and trending norms. Robert Cialdini is the Arizona State University Regents' Professor Emeritus of Psychology and Marketing and the best-selling author of several books, including the mega bestseller Influence: The Psychology of Persuasion.
Hi, Bob. Thank you so much for joining me today. I really appreciate it.
Robert Cialdini: Well, I'm looking forward to it, Katy.
Katy Milkman: So the first thing I want to ask you is to define a trending norm. What is that?
Robert Cialdini: Well, a trending norm involves an observation or a perception that the number of people who are undertaking an activity, that number is moving in a particular direction. It can be up or it could be down, but it's trending in a particular direction, not just staying static or being inconsistent.
Katy Milkman: And obviously, you have done incredibly important research that we've talked about, actually, on the show before on the importance of social norms, so what the majority of people are doing. What's the distinction between a trending norm and just a general norm?
Robert Cialdini: A trending norm is evidence that the existing norm—that is, the number of people who are performing an activity—is changing a static norm. An ordinary norm is "This is the norm." 65% of people wear their masks during the COVID-19 pandemic, but a trending norm would be at the start of that pandemic, it was 30%. Midway through, it was 50%. By the end, it was 65.
Katy Milkman: It's so interesting, I think, that I know the science on social norms that you've studied shows we're really influenced by what the majority of people are doing. So you tell me 65% of people are, say, wearing masks. I think, "Gosh. Oh my gosh, I haven't been wearing mine. I'm abnormal. I better change." But what I think is so interesting about trending norms, I think, is that you've shown it's not just about the absolute level. Could you talk a little bit about what happens when you tell me 5% of people were going to the gym last month and 20% are now? The majority aren't doing it, right, but what happens then?
Robert Cialdini: So what happens is if I just tell you 5%, that's the existing norm, right, the existing number of people who are undertaking the activity. That reduces the likelihood that you will do it as well, because it doesn't seem to be the chosen alternative for most people around you. But if I give you evidence that that has changed over the years or over the months from 5% to 20%, now you think there's something going on that's likely to continue into the future. And that makes you think, "Oh, the majority will soon be moving in this direction, taking this action." And once again, we've got the majority on our side even though it's the future majority, not the existing majority.
Katy Milkman: It's so interesting. So how did you and your collaborators get interested in studying the impact of these trending norms on behavior?
Robert Cialdini: Well, I speak to various organizations about the principles of influence, and one of the principles is the idea of social proof, which is essentially "What are the majority of people around me doing?" And I show how that piece of information spurs people to follow suit.
But I would also get questions from the audience that would say something like, "Well, I've got a new product. It doesn't have the majority of people buying into it," or "I have a startup. I don't have large market share. What do I do under those circumstances?" And I would say, "Don't use the norm. Because if you have a small number, people will take that as a cue not to get in because very few people are doing it." But then I remembered that in graduate school, I once went to a lecture from somebody outside of my area. He was a perception guy. I was a social psychologist. And he talked about a fundamental tendency in his subjects that if they saw a change in a particular direction, they expected that the change would continue in that direction.
And it occurred to me, well, if that's the case, then people who don't have a lot of market share, people who don't have a lot of buy-in for something new might be able to use the idea of norms changing in their direction to overcome this problem of low levels of behavior suppressing future behavior. If you can say that "Well, I have a new product, and last month 5% of our customers chose this new feature. By the middle of the month, it was 10%. And now, it's up to 20%," that might break the domination of the low social norm. So, with several of my graduate students—the work was led by Chad Mortensen and Rebecca Neal—we decided to test this idea.
Katy Milkman: Oh, I would love it if you could talk a little bit about your favorite demonstration that trending norms can change people's decisions.
Robert Cialdini: One that we did, we were interested in getting people to conserve water. So we showed one group of them a newspaper article that just talked about water conservation but didn't give any numbers. So, in the control condition, we said, "Read this article. It's about people conserving water." That was the control. They just read about the idea. Another group, which we called the static norm, they read that 48% of their neighbors are conserving water. That was the static number, but it was below the majority. A third group, which we called the trending norm, were told that 48% of your neighbors are conserving water, but it used to be 37% three years ago. Now, it's moved up to 48%.
Then we said, "That's the end of the experiment. We were just asking you to read this and give us some information about what you thought. Now, we'd like you to be in a consumer preference experiment for a new kind of toothpaste." And we gave them a toothbrush with some toothpaste on it and we said, "Please brush your teeth and then tell us how much you like this new toothpaste." And we measured how much water they used while they were brushing their teeth.
Compared to the control group, those who were told that it was a minority of people who conserved water, they actually used the most water of any in the whole study because they were told most people don't do it. But those people who were told there was a trend that was still a minority, but a trend to 48%, they used the least water of any subjects in our experiment. So clearly, it was the idea of movement in that direction that caused them to undertake action that was consistent with that movement.
Katy Milkman: In addition to loving that study, I also love that it illustrates the breadth of your idea. Because when you first started describing it, you were talking about new products and startup companies and what could they do in order to accelerate excitement when only a small fraction of the population knew about their product so far. But what you show in your research and in that study in particular, it's not like water conservation is a new product. So it doesn't have to be something new. It's just that there has to be an upward momentum in an old behavior or a new behavior and you can get these effects, which I think is really neat.
So, Bob, what do you think explains the persuasive power of these trending norms? What's going on?
Robert Cialdini: Well, we actually looked at that in our studies, and it was the perception that the norm would continue to trend in that direction. That was the thing that spurred people to say, "Well, I want to get on board with this because this is the future."
Katy Milkman: Love that. And why do we care what everybody else is doing or what everyone else is about to be doing?
Robert Cialdini: We live in what is the most stimulus-saturated, information-overloaded environment in our history, and all that information has increased our uncertainty about what we should do in any given situation. And one way we can reduce that uncertainty is to look at what those around us like us are doing or have been doing in that situation. And that allows us to say, "Oh, OK. Well, this is probably a good choice for me, too."
Katy Milkman: And of course, there's opportunities for really rational following because you learn about a great new product, and also sometimes it leads you astray. So how do you apply what you've learned about trending norms in your day-to-day life?
Robert Cialdini: Well, remember I was telling you that when I give lectures, and I talk about the various principles of influence, and I talk about social proof or norms, somebody says, "Well, I have a new startup," or "I have a new feature to my product. And it's great, but I don't have a market share or a buy-in that I can report." What I say now is, "Let me tell you about some research on trending norms." If you have something new, and it's moving in the right direction, say that. It rescues you from the penalty of being new. As long as you have merit and are moving in the right direction, you're entitled to tell people of that.
Katy Milkman: I love that. By the way, I should just tell our listeners more and more people are listening to Choiceology every episode, which is, by the way, I'm not lying. Our numbers just keep going up. But anyway, I had to use that little trick there.
Robert Cialdini: It's brilliant. And what I love about it …
Katy Milkman: It's true.
Robert Cialdini: … is its authenticity. Who's steered wrong by that piece of information? Who loses to get that piece of information? Nobody.
Katy Milkman: I have to say, as a parent, also I'm constantly looking for other ways that I can share trending norms with my son as I'm seeing him grow up. And all the young kids have their challenges with … They don't love reading. They don't love writing, or they don't love math. But as they grow, there's an increasing number who are getting into playing chess, playing the flute, practicing, doing homework. And so that's a thing that parents, I think, get to reinforce when we know about your work on trending norms, that we can look for those upticks and highlight them to our budding scholars and so on.
Robert Cialdini: That's a great idea, but I'd recommend to always have three data points. That's a trend. So one data point is a statistic. Two represent a change, but changes can go up and down. Changes can reverse. But three, that's a trend. That's an arrow in a particular direction, and that's what produces the mediating causal effect for trending norms.
Katy Milkman: Bob, thank you so much for taking the time to talk with me today. I have really enjoyed this conversation. As I always do whenever I talk to you, I learn lots of great new things.
Robert Cialdini: I enjoyed it as well.
Katy Milkman: Robert Cialdini is the Arizona State University Regents' Professor Emeritus of Psychology and Marketing and the best-selling author of several books, including Influence: The Psychology of Persuasion, which has sold over 5 million copies. And its sales numbers just keep growing. That's 100% true, but it's also my way of working a trending norm into Bob's bio. You can find links to Bob's work in the show notes and at schwab.com/podcast.
Jumping on a bandwagon where there's little-to-no cost is one thing. But when you sink assets into a speculative bubble only to see it burst, well, the impact on your finances could be severe. The Financial Decoder podcast explores ways you can mitigate biases before they affect your portfolio—biases like following the herd or expecting recent trends to continue. You can find the show at schwab.com/financialdecoder or wherever you get your podcasts.
As you've heard, trending norms can affect behavior for better and for worse. Jumping on the bandwagon is great if it leads to lower water consumption or electricity usage. And there's wonderful recent research from Stanford University psychologists Gregg Sparkman and Greg Walton showing that trending norms can be used to spur other environmentally friendly behavior change as well, like reduced meat consumption. I've also found it helpful as a parent to point out trending norms that seem worth adopting to my son. But the impact of trending norms can be harmful, too.
It's not ideal when our rush to join a burgeoning trend leads us to spend exorbitantly on plush toys or NFTs or whatever the latest fad may be. The good news is with an awareness that you're wired to react with excitement when you see an upward trend, you can be more circumspect the next time you hear about a growing interest in your group of friends in a certain type of investment, diet, or electronic gizmo. Check whether the facts match the hype before you let your instincts drive you into a frenzy.
You've been listening to Choiceology, an original podcast from Charles Schwab. If you've enjoyed this show, we'd be really grateful if you'd leave us a review on Apple Podcasts, a rating on Spotify, or feedback wherever you listen. And you can also follow us for free in your favorite podcasting app. And if you want more of the kinds of insights we bring you on Choiceology about how to improve your decisions, you can order my book, How to Change, or sign up for my monthly newsletter, Milkman Delivers, at katymilkman.com/newsletter.
In two weeks, we explore the world of Korean pop music, also known as K-pop, for a look at how lopsided relationships can affect our behavior in surprising ways. I'm Dr. Katy Milkman. Talk to you soon.
Speaker 21: For important disclosures, see the show notes or visit schwab.com/podcast.
