Toys As a Leading Wedge for World Domination

So I was with the kids in the toy aisle of a drugstore when I saw something that made my blood run cold:

Yes, that's a martial arts expert battle hamster

This Kung Zhu toy makes squeaky little Ai-ee karate noises, and runs around on a table avoiding edges.   There was a whole section of them.  There were pink ones for girls called Zhu Zhu Pets, and these violent ones for boys.  They come with battle tanks and armor and combat arenas, or in pink houses with habit trails.  They’ve got of all the sinister aspects of modern toys that make them addictive and obsession-inspiring: collectible variants, a massive array of accessories, online communities, video games, interactivity, and cute-cute-cute.  My kids wanted one immediately. And they’re less than $10, avoiding that dread extra digit.

“This is the end,” I thought.  “The Chinese have finally figured out that it’s better to own a toy franchise than to build for one.”  The profit margin on a brand is much higher than that on the toy itself, since any competitor willing to pay its workers 10 cents less per day (cough, Vietnam) can take the business away from you.  Martial arts have already penetrated the consciousness of children everywhere, and so that would be a natural avenue for the Chinese bid for world toy domination.

See, I have this theory about how the whole global economic system has  been divvied up.   It’s based on what kind of stuff each part of the world has specialized in making. You buy stuff for one of two reasons: utility or pleasure.   There’s stuff you need, and stuff you want.  Stuff also comes in two flavors: cheap or good.   You can pay a little for something adequate, or pay more for something that’s of higher quality.   Everything is going to fall somewhere along these two axes: the utility vs pleasure graphed one way, and cost vs quality graphed the other.

This means that there are four broad categories of stuff:

  • Cheap utility goods:  staple foods, work clothes, detergent.  Most countries make these themselves.  Your basic car – your Chevy, Fiat, or Lada – is usually made locally.
  • Quality utility goods: trucks, industrial machinery, big electronics.  These come from Japan and Germany, plus Scandinavia.   That’s where the good cars come from.
  • Quality pleasure goods: cuisine, fashion, high art.  France and Italy are the main producers here, and Europe in general.  That’s where fashionable cars come from: your Ferrari or Lotus.
  • Cheap pleasure goods: fast food, sneakers and jeans, popular music and movies and toys.  Yes, this is the big American (and UK) export.

The US is much more known around the world for its cheap, fun stuff than it is for the stuff that we ourselves are most proud of.  Yes, we’re proud of NASA and Intel, but a lot more people drink Coca-Cola and wear Nikes.  They listen to Beyoncé, they watch Pixar, and they play with Barbie.

That’s not to say that cheap, fun stuff is easy to produce.  It’s really hard to create a Beyoncé, and takes vast experience and decades of effort.   The world is full of pretty singers, but few with numbers or moves like that.  Pixar is at the absolute bleeding edge of graphics, one of the most computationally and mathematically demanding fields in computing.   Barbie gets tested and tweaked continuously, and pioneered all the addiction techniques that I mentioned above.

So here was the source of my dismay in the toy aisle – China looked to be muscling in on the cheap&fun sector that the US has dominated for a long time.  They’ve already tried for another part of the cheap&fun sector with big-budget movies, but so far they’ve sucked.   Most seem to star the charisma-less Jet Li, a guy who can leap his own height into the air but looks pained if he has to kiss the heroine.  Hong Kong used to make good movies, but their best actor, Chow Yun-Fat, a guy with George-Clooney levels of charm, has aged out of leading-man roles, and the HK studios were killed in the 90s by piracy.

Anyway, so who actually designed these Zhu Zhu and Kung Zhu hamster toys?  The company name was nondescript, Cepia LLC.  It sounded like a shell operation.  Real companies are Inc’s, not LLC‘s, which look to me like tax dodges.  Their web site was uninformative, but I found out a lot about them in the St Louis Post-Dispatch.  They’re based in Missouri right outside St. Louis.  They’re a tiny operation, only 16 people (plus 30 in China), but they really are toy people, and they really did seem to invent this themselves.  Their CEO, Russell Hornsby, was at Mattel, went through the Powerpuff craze, and also worked on light-up teddy bears before hitting on this.   His daughter Natalie is director of marketing (and a Boston College grad!), so this looks like a family business.  They sold $70M of them last year (when it was the hot toy at Christmas) and will probably double that this year.

They’ve had a lot of grief for a small operation.  Their financial controller was indicted last March for embezzling $400k.  A consumer watchdog organization, GoodGuide, claimed there was antimony in the Zhu Zhu fur, but their testing didn’t match the Consumer Safety Products Commission method, and it was later retracted.   They had a joint agreement with the Build-a-Bear toy chain, also based in St. Louis, but Build-a-Bear bailed amidst claims that the fad had passed.

Still, they are an American operation, and they’re plucky upstarts at that.  Even though their toys have Asian names and manga styling, they show a lot of American verve and humor.  Maybe I’m panicking too soon.

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