Silly putty was invented accidently by James Wright, an engineer with General Electric, in the early 1940s when he was asked to develop a low-cost synthetic rubber substitute for the military. The United States War Production Board hoped that GE engineers could invent a chemically synthesized rubber which could be used in the mass production of gas masks, military gear, and jet and airplane tires.

Wright's experimentations with silicone oil and boric acid resulted in a rubber-like compound with bizarre properties. You could roll it into a ball and bounce it extremely high; you could stretch it to enormous length; you could lift images from newspaper print and comic strips. It was an amazing new product but useless to the war effort. There were no industrial advantages to the "bouncing putty," only psychological ones: GE engineers often entertained themselves for hours with it.

In 1949, Wright brought his bouncing putty to a party. Ruth Fallgatter, a New Haven toy store owner, was intrigued by the putty's huge popularity with the partygoers. At the time, she was designing a toy catalogue with the help of Peter Hodgson, an advertising copywriter. They included Wright's putty in their issue, and it quickly outsold all other items in the catalogue.

Despite the putty's amazing success, Fallgatter was unimpressed. Hodgson, however, foresaw the market value of the putty. For $147.00, he bought a huge quantity of the putty from GE and hired a Yale student to cut it into one-ounce balls. Hodgson then packaged the putty in colored, plastic eggs and sold it for one dollar a piece. It was now called Silly Putty, but there was nothing silly about its sales: it became an overnight sensation and racked up sales of millions of dollars, becoming one of the most successful toys ever marketed in the United States. Hodgson became a wealthy man and upon his death, his estate was worth almost $140 million.