
A man who destroyed his multimillion dollar company in 10 seconds (2018) - dragontamer
https://thehustle.co/gerald-ratners-billion-dollar-speech
======
Phillipharryt
So I've actually done a fair amount of research on this speech, and there a
few skipped points most times people report on it.

Firstly the audience loved the jokes, they laughed at them all. It wasn't like
he delivered them to stunned faces and immediate shock. The only thing that
brought him down was a newspaper reporter noted it down and newspapers pushed
it as an artificial scandal. Everyone buying 5 pound earrings knew they were
of very low quality, they just didn't want it being shouted at them in their
daily news.

Secondly it wasn't even the first time he had publicly made these sorts of
jokes, in fact it wasn't even the first time they had been published in the
papers.

This was entirely a newspaper driven downfall, they wanted to see him fail and
wanted to sell papers about a scandal, so they did.

~~~
thaumasiotes
> it wasn't even the first time he had publicly made these sorts of jokes, in
> fact it wasn't even the first time they had been published in the papers.

> This was entirely a newspaper driven downfall

That first point is good evidence that the jokes weren't very responsible for
what happened.

But it seems like it's just as good evidence that newspaper coverage also
wasn't very responsible. Why attribute it to the newspapers this time, when
they tried and failed before?

~~~
NikkiA
It wasn't the newspapers, 1991 was the peak of the 1990 recession in the UK:

[https://en.wikipedia.org/wiki/Early_1990s_recession#Civil_un...](https://en.wikipedia.org/wiki/Early_1990s_recession#Civil_unrest)

~~~
timthorn
Raters was well placed amongst jewellers to ride the recession. I remember the
news coverage of this well - the decline in sales was rapid and directly
attributable to the speech, and the implication that his customers were mugs.

~~~
NikkiA
Based on what? they were selling cheap costume jewellery to the working and
lower middle class, both of which were exceptionally squeezed by the 10 years
of thatcher that had just ended.

Luxuries are typically the first thing to go for those close to poverty in a
recession.

I would argue that Ratners were uniquely placed to suffer the worst in a
recession, and that they hadn't collapsed during the aftermath of Black Monday
is the bigger surprise.

------
cryptozeus
Kudos to the guy for bouncing back though !!

“After losing everything, he toiled in misery for years — but he eventually
made an improbable comeback. In 1997, he took out a £155k (US$203k) loan on
his house, built up a health club business, and sold it for £3.9m (US$5.1m).
He then used the profits to start an online jewelry company. (The Ratners
Group rebranded as Signet in 1993; today, it is the largest diamond retailer
in the world.)”

~~~
ylesaout
While he made a successful comeback (however far from his first success),
saying he toiled in misery for years is a little bit exagerated. Indeed, he
was still the owner of a house (and probably of other goods). And this house
was big enough to have a value probably equal to a today million dollars.
That's not what I call to be toiled in misery.

~~~
Smithalicious
Whether or not he toiled in misery is independent of how much money he had. It
only depends on whether he toiled, and whether he was miserable doing so.

~~~
chosenbreed37
Indeed. And I dare say living in a million dollar house is not so comforting
if you've just forfeited $125m worth of profits year on year :-)

~~~
lutorm
What happened to diversification??

------
fortran77
The modern examples cited weren't nearly as bad:

\- Lulumon didn't seem to be hurt by Chip Wilson. In fact, the "notoriety"
made me aware they they sold men's clothes, too, and I went there and bought
some great athletic wear.

\- Many customers appreciated Barclays' warning not to "pile up debts." That
would give me a favorable opinion of a company that offers lines of credit,
not a bad one.

~~~
sharadov
Lululemon is genius, their quality is great, but the branding is even better!
They revolutionized the exercise wear industry, were single-handedly
responsible for "athleisure" and killing denim sales!

~~~
fortran77
and maybe it's true that some styles of clothing are "not for everyone"

~~~
mywittyname
His comments weren't even controversial, as they echoed beliefs that are held
by those in the fashion industry. Lots of clothing companies make it plainly
obvious not everyone is supposed to buy their products.

~~~
trentnix
He went into it in detail when he was interviewed by Guy Raz. Wilson defended
himself by saying his comments had nothing to do with obesity, but rather
material. He is a fabrics guy, and his clothes were being used to shape, a la
Spanx, when they weren’t built to shape at all.

It’s a fascinating interview and one of the best in the “How I Built This”
series.

~~~
fortran77
I heard a tape of the original interview, too, and I was shocked that certain
people with an agenda used it to ruin him. He very gently suggested that
wearing them very tight and using the garments as a "spanx"-type girdle to
shape wasn't how they're supposed to be worn. Plus-size activists hit the
roof, for unknown reasons.

------
skrebbel
I've always been amazed at how important it appears to be to lie about selling
crap. I find that invariably, businesses who compete on price make it iff they
_say_ it's good stuff, even if everybody knows it isn't.

Eg Holland has a number of cheap shoe chains. Schoenenreus and Scapino both
breathe an air of cheapness, and one went bust and the other is struggling
bad. Their direct competitor Van Haren sells exactly equally crappy shoes, and
everybody knows it, but they are thriving, simply because the store feels like
a proper high quality shoe store.

Or take ALDI, which competes on price and nothing else. In every country I
visited has the words "the ALDI principle: low prices, high quality" printed
on every storefront and on every _page_ of their paper promo flyers. Granted,
little of what they sell is "total crap", but little is of truly high quality
either. Their bread goes stale faster and their coffee is bitter. This
surprises nobody.

It appears to me that this weird dichotomy is the only way to successfully
compete on price. Make it perfectly obvious that you're cheap and of mediocre
quality at best, while loudly shouting that the quality is high. Nobody
believes you, but nobody wants to buy from you if you're honest about what
you're selling.

I find this surprising because blatant lies don't generally work that well in
the long term, so why do they here? I generally _hate_ dishonest messaging.
Why don't I mind here? I buy ALDI and Van Haren all the time.

~~~
clort
> Their bread goes stale faster

Interestingly, I wonder why this would be a metric of lower quality bread
rather than higher? I mean, the obvious way to make the bread last longer
would be to pump it full of preservatives, and the white stuff you buy pre-
sliced in packs lasts for ages though it is not really bread and the quality
is obviously low (or is it? The slices are so smooth, the bubbles so even and
the crust not hard at all)

When I have been to France and bought a baguette in the morning, obviously it
is normally eaten right away because fresh and delicious, but if you leave it
until the afternoon it is already stale and chewy. Does that imply low
quality?

(I do buy some food from Aldi, though I prefer my bread from the baker across
the road :)

~~~
etage3
Common baguette is regarded as a low quality, industrial version of "real"
bread (in France). Some traditional bakeries still use ancient methods (and
flour and yeast), the bread is good to eat for more than a week.

------
lifeisstillgood
I would say this is not the Ratner effect but the Othello effect (as in
Reversi not Shakespeare)

Ratner merely put down the last piece that flipped almost the whole board.
Marketing is usually the uphill struggle to persuade anyone looking at the
board that "white is winning" when it is really anyone's game.

But eventually one piece is played, often a public failure, and everyone
realises the board was destined to be black anyway.

It's much harder to play this marketing game when you are selling costume
jewellery or other fashion lead items. And the odds of someone flipping the
board are high without you realising it.

But people play it that way anyway.

~~~
vinceguidry
That board didn't have to flip. Ratner could have just kept selling the brand
instead of stating his true opinions to a media circus. And the brand would
have retained its value, perhaps all the way to today if he could have kept
the unit economics alive.

What made the brand successful wasn't what Ratner thought it was.

The word at hand here is 'hubris'. Successful people slowly lose touch with
the rest of the world and eventually make a colossal screw-up.

~~~
lifeisstillgood
No eventually it would flip - it happens all the time. It's just this time the
boss of the company laid down the final piece so it sticks in the mind

~~~
mrkstu
The re-branded company he was forced out of is now the largest diamond
retailer in the world- so I'd say that the problem was him and his mouth, not
an inevitable flip in fortune.

~~~
saalweachter
It's also possible he wasn't a _real_ problem, but when his remarks caused a
temporary (big) problem for the company, other stakeholders saw the
opportunity to take control.

There's probably a counterfactual universe where he remained in his position,
he learned a valuable lesson on keeping his mouth shut in public, and the
company re-branded and recovered on a similar trajectory.

~~~
im3w1l
Zuckerbergs infamous "People just submitted it. I don't know why. They 'trust
me'. Dumbfucks" springs to mind. While I'm sure there is some amount of long
term damage, you'd be hardpressed to say it has crippled Facebook.

------
sudhirj
This is really applicable to any products that are valued based on their
marketing efforts instead of intrinsic value or utility. Costume jewellery,
designer clothes, some kinds of art, all derive their value from the story the
creators tell. The most expensive art seems to be that which has the most
thoroughly verified, or at least the most believable story.

I like to think I’d prefer Apple products over the competition and pay a
premium for them even if I didn’t know Jobs or Ive, or watched the marketing
videos - but I’m not entirely sure these days. I Tim Cook said Apple products
were super cheap to produce, or Ive said he didn’t design any of them and had
some intern do it, would sales tank?

~~~
seem_2211
Price, value and practical utility are not really correlated.

A Rolex and a Timex will both tell you the time. An iPhone and a $129 Android
will do mostly similar things. A Toyota Camry and a Porsche will both get you
to work.

But practical utility and value aren't necessarily the most important thing.

Apple intuitively understood this, at a time when other computer companies
didn't. Lots of people look at a Macbook and see an overpriced computer that
costs a few hundred dollars more than a similarly equipped PC, albeit in a
pretty case. But that's the point - lots of people want their computer to look
good!

Apple products are relatively cheap to produce - and they make an enormous
margin on their hardware. But it doesn't feel cheap. The boxes are
substantial. The finishings are high quality. The user experience is taken
care of. Other PC makers might have been much cheaper, but you notice that to
do so, they've cut corners in places.

I don't think the lesson here is in what he said, but rather that he made his
customers feel like idiots. Only a fool would believe that a ring for £1 has
the level of quality and craftsmanship that you'd get with a £100 ring, but
you don't want to feel like a dumbass for buying it. You don't go to McDonalds
with expectations of buying a Michelin Star meal. You go there for something
warm & tasty, that comes out quickly.

~~~
komali2
I feel the argument but I think I would need different examples to better
understand.

There are reasons for owning a watch other than "tell the time," which could
include "tell the time accurately without ever needing to change batteries,"
or "tell the time and date," or "tell the time while scuba diving."

Rolex may be overkill but different watches serve different roles, and it's
not just brand name alone that makes Rolex cost orders of magnitude more - in
many ways, it really is just that much better of a product. Same for Camry vs
Porsche.

An Apple product, particularly a Macbook, on the other hand, not so much. It's
a nice aluminum chassis over crappy, cheap internals that break so often
people throw around words like "class action" to describe the keyboards. It's
like cramming a knock-off Timex movement into a Rolex case.

~~~
AmericanChopper
> Rolex may be overkill but different watches serve different roles

A Casio is going to tell the time better than a Rolex. Quartz watches are much
more precise, and they’re powered by batteries, so last much longer without
any maintenance. Rolex is simply in the segment of high quality, hand made
mechanical watches. A segment people like for reasons other than its precision
in keeping time.

------
jdietrich
Michael O'Leary being incredibly rude is a key part of Ryanair's branding. If
you're paying £19 for a two hour flight, you'll always have the sneaking
suspicion that the airline is skimping on maintenance. O'Leary makes it
absolutely clear that they save money by treating their passengers like
cattle. He carefully cultivates the image of a man who utterly despises his
own customers, but is far too miserly to allow an aircraft to crash.

[https://en.wikipedia.org/wiki/Michael_O%27Leary_(businessman...](https://en.wikipedia.org/wiki/Michael_O%27Leary_\(businessman\)#Controversy_and_reputation)

~~~
downandout
_He carefully cultivates the image of a man who utterly despises his own
customers, but is far too miserly to allow an aircraft to crash._

That image will keep them going right up until they have a fatal crash, at
which point the press, the government, and victims’ attorneys will use every
word he has ever said about being cheap to crucify him and the company. Given
their volume of flights, a fatal crash is statistically likely to happen at
some point. I would be very careful ever making such statements if I were in
such an industry.

~~~
sprafa
Why would Ryanair ever have a crash? Their airplanes are usually quite new.
The EU hasn’t had an accidental plane crash in ages. Have you ever flown
Ryanair?

~~~
smcl
Hang on, the EU has had heaps from small (the Piper that went down over the
Alps _yesterday_ and the plane carrying Emiliano Sala come to mind) to large
(Air France 447).

~~~
sprafa
I meant large passenger planes. And I meant accidental crashes within the EU
territory not extraterritorial. I believe the safety record is pretty good,
but can’t tell you it’s perfect

------
magoon
This reminds me of Adam Osborne, who tanked sales of his new Osbourne 1 by
prematurely bragging about the future Osbourne 2.

[https://en.m.wikipedia.org/wiki/Osborne_effect](https://en.m.wikipedia.org/wiki/Osborne_effect)

~~~
happycube
Interesting that much of what sunk Osborune was actually a sunk cost fallacy
from the $150K of assembled Osbourne 1 boards... if they had been sold off to
a liquidator or hobbiests, they might've still turned a profit on em in the
end.

At the very least they could've scrapped the boards and taken the tax
writeoff.

~~~
CodeWriter23
Companies like Osborne and many others in the early-80’s microcomputer game
were built by engineers who had taken a second mortgage. So when the cash ran
out, there weren’t second chances via creative finance. Many ended up going
back to their old high-paying jobs to pay down their debt and keep the house.

------
kozak
Remind me of the recent case where a person (Google tells me that her name is
Maria Butina) got busted as a Russian spy after she had a habit of bragging
that she was a Russian spy when drunk.

~~~
metamet
And George Papadopoulos bragging, kicking off the investigation:

> During a night of heavy drinking at an upscale London bar in May 2016,
> George Papadopoulos, a young foreign policy adviser to the Trump campaign,
> made a startling revelation to Australia’s top diplomat in Britain: Russia
> had political dirt on Hillary Clinton.

[https://www.nytimes.com/2017/12/30/us/politics/how-fbi-
russi...](https://www.nytimes.com/2017/12/30/us/politics/how-fbi-russia-
investigation-began-george-papadopoulos.html)

People love to brag.

------
hirundo
I did a ratner with a girl once. She said something like "well you have good
genes anyway, right?". I listed a few of my imperfections. She said "oh", and
went away.

It was a good lesson.

------
smallgovt
I think the more interesting lesson to learn from this was how Ratner was able
to deal and cope with the public embarrassment following the mishap. It
reminds me of this TED talk where Jon Ronson talks about how public shaming
has gone out of control with the advent of social media:
[https://www.ted.com/talks/jon_ronson_what_happens_when_onlin...](https://www.ted.com/talks/jon_ronson_what_happens_when_online_shaming_spirals_out_of_control?language=en)

~~~
dragontamer
Actually, the best "public shaming" talk I've seen are the ones given by
Monica Lewinsky. When you consider that Monica Lewinsky was 22 years old
during the time of the scandal, a lot of the stuff going on was simply outside
of her control.

Seeing things from her perspective is pretty interesting, to say the least:
[https://www.youtube.com/watch?v=Yq7Eh6JTKIg](https://www.youtube.com/watch?v=Yq7Eh6JTKIg)

John Oliver starts the discussion, but there is a Lewinsky interview which is
very eye-opening for me.

~~~
Ididntdothis
I never understood why Lewinsky got ridiculed that much. If anything she was a
victim in the whole thing. Or am I missing something?

~~~
gdy
How is she a victim?

~~~
tbyehl
You can debate if Lewinsky was a victim of Clinton but she absolutely was a
victim of Linda Tripp, who had her own vendetta against the Clintons. Tripp
manipulated her, secretly recorded their conversations, lied, betrayed her
confidences, and served her up to the machinery that was working to take down
Clinton.

~~~
gdy
I almost agree, but Tripp didn't put that blue dress in the freezer.

~~~
tbyehl
When Lewinsky told Tripp that she wanted to have the dress cleaned, Tripp
manipulated her into preserving it.

------
atombender
In the 90s there was a popular, now-forgotten CRM/bookkeeping system for MS-
DOS called Vega. When they launched version 2.0, the founder/CEO boasted to
the press about how 2.0 was old hat, and how they were working on 3.0, which
was going to be so much better. Subsequently, almost nobody bought 2.0,
because the current product worked well enough and they wanted to hold out for
3.0. I believe the company went under as a result.

~~~
marktangotango
I lived through that exact thing a few years ago. Company never recovered.

------
insickness
> so why did he do it?

This is the most interesting question, which the article doesn't answer.

~~~
mjw1007
He'd made the same jokes in speeches several times before, and it had gone
down well with the audience.

Presumably he just didn't consider the possibility that the press would think
it worth making a story out of.

~~~
cmauniada
I don't get it. So he made these jokes infront of shareholders just for kicks?
Why would someone even say this infront of anyone, I don't understand. I am
starting to think he might have been under the influence.

~~~
dboreham
Shareholders and customers are basically on the opposite sides of a trade. All
public companies have this problem to some degree: they want to tell their
shareholders "we figured out how to offload stuff that we buy cheap onto
unsuspecting customers, thereby making more profit for you". Meanwhile they
want to tell their customers "look how wonderful and high quality our products
are". These days this problem is solved with code-speak that wall st people
understand but which sounds relatively benign and boring to cuswif they happen
to see it e.g. "margin expansion through input cost reduction".

~~~
dennisgorelik
It is an excellent point about "code-speak" as a tool to be open with experts
without pissing off clueless customers.

------
cookiesboxcar
Article mentions that they had to change their name to "The Signet Group" ...
the now parent company of Zales/Kay/Jared. I'd be interested to learn more
about that transition

[https://en.wikipedia.org/wiki/Signet_Jewelers](https://en.wikipedia.org/wiki/Signet_Jewelers)

~~~
blowski
Indeed, in the UK they own H Samuel and Ernest Jones - with exactly the same
business model and value as Ratner’s. So you could argue it didn’t have much
long term impact.

~~~
NeedMoreTea
Well they closed hundreds of shops in the years immediately following, and
already owned H Samuel back then. Not sure about E Jones, which is a little
more upmarket anyway.

------
keiferski
This situation sounds like more of an indictment of the media and
sensationalist journalism more than the entrepreneur himself. People make
mistakes and say stupid things sometimes, after all, they’re human.

Expecting leaders to be perfect 100% of the time will only result in leaders
that are good at appearing perfect.

~~~
giarc
I think you can expect a CEO of a company not to call their own products
"crap".

~~~
keiferski
Maybe from a marketing perspective, sure. But from a truthfulness perspective,
I think you’ll find that most people are annoyed by the fake opinions that
come from most businesses. Indeed a number of companies have been successful
specifically because they talk like real human beings and readily admit the
strengths and weaknesses of their products.

~~~
WalterBright
> Indeed a number of companies have been successful specifically because they
> talk like real human beings and readily admit the strengths and weaknesses
> of their products.

I'm curious - can you name a couple?

~~~
macintux
Dominos used the lousy quality of their pizzas to market a revamped recipe.

~~~
giarc
That's not quite an apples to apples comparison. CEO of the jewelry store was
saying that his current products were crap. I'm assuming Dominos was saying
"our old recipe was crap, new receipe is good."

------
krustyburger
What kind of jewelry did people think they were getting for a few quid?

~~~
dumbfoundded
Of course, everyone who bought it already knew it was crap. It's the same
thing for buying $15K engagement rings. Everyone knows it's a stupid use of
money and that the rings have no value. Same goes for clothing, cars, and many
other things.

These types of products succeed because of a shared delusion. Take fashion for
instance. Everyone believes some clothes are more fashionable than others. The
way you dress says a lot about you but why? It's simply because other people
think it does. If the delusion runs into reality from the person hawking it,
it can collapse quite quickly.

~~~
sysbin
That's a far leap from engagement ring cost being the result of society
sharing a delusion and believing there is a delusion with some clothes being
more fashionable than others.

Psychology has a definition named the halo effect and it's very real. A person
definitely gains advantages in society when they appear more attractive than
less attractive. Naturally people associate good health with attractiveness
and it's hard wired in us for finding a healthy mate compared to an unhealthy
mate. Good choice of clothing for the frame of a person can enhance personal
features and make a person look better than if wearing something less fitting.
So there is some benefit & gain that can be made with understanding fashion of
clothes as a real benefit. Is the advantage based on a delusion of a person
being more healthy than another? Sure, but it isn't because people
intentionally have a delusion about one shirt looking better than another.

~~~
dumbfoundded
I absolutely agree with some clothing is used for health/sexual/wealth
signaling and it works to some degree. But these simple ideas don't nearly
explain fashion. If fashion didn't include a huge amount of delusion, it would
converge. It wouldn't shift with each generation.

We are more than hardwired to find the most capable mate. We're also hardwired
to pick up social cues so if a large enough group of people believe something,
we believe it too. If everyone you knew started wearing those MC Hammer pants
tomorrow, how long would you hold out? If people suddenly and entirely stopped
wearing ties with suits, would continue to wear the most unnecessary accessory
ever? Why does everyone in tech dress so similarly?

------
mjb
Having contempt for your customers is not a good long-term business strategy.
Some people get away with it for a while, but eventually they get found out.

------
klagermkii
This should be a lesson for adolescents who wonder why people tend to get less
and less "edgy" as they grow up.

Just takes one moment of too much edge to lose the gamble and end up throwing
everything away.

~~~
seph-reed
I think the adolescents might be on to something with that. I tend to do a
good job of keeping my unpopular opinions between me and close friends, but I
can't say I'm thrilled with the dependency on nepotism that's creeping into my
life.

Perhaps being edgy is the best way to force oneself into self reliance, and
self reliance being the best way to hold ground against corruption... maybe
the edgelessness of "adults" is just a sign of forfeit within a corrupt
system.

~~~
perl4ever
Being "edgy" is a symptom of still having a mindset that there are railings
between you and the abyss, and/or someone whose purpose in life is to tackle
you before you go over the "edge". Believing that you can avoid it in the long
run, while fearing you're not an adult if you stay where it's safe.

~~~
seph-reed
There are some interesting adventures over the edge.

~~~
perl4ever
Once you've been there, you no longer focus on the boundary so much. Because
the tension between going over vs not going over is resolved.

------
calibas
What I find most fascinating is that a multimillion dollar company was
destroyed simply because the owner told the truth. Imagine if fast food CEOs
were honest about the quality of their food instead of just parroting
marketing bullshit.

~~~
ghaff
I rarely eat at the big fast food chains--and it's usually because I have no
other options. But what's the "truth" about the quality of the food?

The CEO could quite honestly say that their goals are consistency, speed, food
safety, and affordability. Quality? I expect the honest response would be
something along the lines of 1.) Millions of customers apparently like our
product and 2.) We try to deliver the best quality product we can subject to
our customers' other priorities. The CEO probably believes this to some degree
or other. They're not trying to deliver a high-end steakhouse experience.
McDonald's isn't even trying to deliver a Shake Shack experience--which maybe
costs 2x (at least)?

~~~
mywittyname
I eat McDonalds rather frequently for lunch because there's one nearby, a
double cheeseburger is $1.89, and has 26g of protein and under 500 calories. I
think they taste fine; I wouldn't pay more for a better tasting one.

I'm pretty sure nearly every McDonalds customer thinks the same way. They want
quick, cheap, safely prepared food that tastes good enough to eat.

~~~
ghaff
I pretty much can't stand them personally--except for the fries and maybe a
couple of breakfast items. But I readily admit I'm a bit of a foodie. I'm
certainly not going to begrudge others who find them a good value or even,
gasp, like them.

~~~
peteretep
I would also identify as a foodie. But I don't always need a 12 course tasting
menu, and sometimes a dollar cheeseburger with a mild and predictable taste is
a good source of calories.

~~~
ghaff
Fair enough. I just find McDonald's sort of ick. I'd rather (and am in a
position to) spend a few bucks more to eat something I actually enjoy. And I'm
happy to just skip an ick meal.

But that's not a value judgement. Just how I personally prefer to eat.

------
overcast
What I don't understand, is how it wasn't immediately apparent this stuff was
junk? You couldn't possibly think that it was equal in quality to much more
expensive competitors. I guess it's just the case of not being real, until
someone says it.

~~~
tyingq
Diamonds, especially the recent craze around discolored ones might be a good
comparison. They are valuable mostly because of years of shrewd marketing. If
DeBeers started telling the truth, they could drop in value pretty quickly.

~~~
Loughla
I was absolutely floored when I started seeing advertisements for 'chocolate'
diamonds a few years back, and even more floored that people I knew just HAD
to have them.

I had dealt with 'chocolate' diamonds for years, I currently have hundreds in
my wood shop! My father works as a machinist, and brown, low-quality diamonds
are their abrasive of choice for many jobs. They're (or rather, they were)
super cheap because they were such low quality. I always swiped a handful when
I visited him at work as a kid, because they made great pellets (they were
exceptionally tiny and really hard) for my slingshot. I had a whole jug of
them and just forgot about the things.

And now here we are.

~~~
WalterBright
Just look at the mania for wearing torn jeans.

~~~
omegaham
At least jeans manufacturers weren't marketing based on the unblemished
workmanship of their jeans. Their typical message is "Jeans are worn by
rugged, individualist people. You want to be a rugged independent person,
right?" And I think that torn jeans can fit into that. Like, a farmer might
rip his jeans and keep wearing them or something, so ripped jeans might make
you look even more rugged and individualist.

Chocolate diamonds are a direct contradiction of regular diamond marketing. If
you go to great lengths to talk about how important clarity is when justifying
your diamonds' prices, it's particularly silly when you start selling _the
least clear diamonds possible_.

~~~
WalterBright
Black pearls were worthless until some enterprising jeweler made a thing out
of them being black.

------
yummypaint
All the guy did was be honest, and its not like he revealed anything people
didnt know already. Seems like an emperors new clothes kind of situation.

~~~
4ntonius8lock
You can't offend anybody more than by telling them a truth they don't want to
hear.

If you insult someone with something that is clearly not true, they will brush
it off.

But tell the truth they don't like and you will be hated more than anyone.

This is coming from someone who was frequently hated for saying the truth,
because I come from a different culture and hadn't figured out how to navigate
human interactions in the west. Especially when it comes to points that are
related to people's identity formation (jewelry being a part of that)

Or as a favorite song says:

When the truth walks away

Everybody stays

Cause the truth about the world is that crime does pay

~~~
kamaal
I guess the working class buyers knew they were buying cheap stuff. They just
don't want to be humiliated or joked for doing so.

Often people buying these women's jewelry are men. A lot of women care more
for their men who take time out and care to buy anything for mush more than
the price itself.

Why humiliate them this way?

------
throwaway6845
> Elon Musk (right) has drawn comparisons to Gerald Ratner in recent years

The 1980s British businessman who Musk most reminds me of is not Gerald Ratner
but Robert Maxwell.

~~~
walshemj
Really I don't recall Elon doing any of the really shady shit that Maxwell
did.

~~~
seem_2211
You should take a closer look at Elon Musk (starting with some of the sketchy
shenanigans at Solar City).

~~~
walshemj
Your probably to young to recall Maxwells shady dealings in the
political/spook world (some people think that is what killed him)

And also stealing hundreds of millions from pensions funds that lead to
wholesale reform of the pensions industry in the UK

~~~
seem_2211
Yeah, both are shady AF.

------
a-raccoon
I wish more CEOs were as witty, plain and blunt as his remarks were. All his
talking points were true, all of his jokes on point, and the only people who
probably gave a crap were a very small handful of financial investors that are
easily (and completely unreasonably) spooked.

I say there should be __more __Ratners. Standardize his personality-type
across all industries and political spheres.

------
abstractbarista
I guess I'm weird compared to most consumers or investors. I applaud and enjoy
when company leaders call out their products or services as crap. Because
frankly, they mostly are. Most business is partially a constant lie about how
good, reliable, or worthwhile they are. This is constant across the global
economy. So why not embrace it? We all know you get what you pay for...

------
SomeOtherThrow
What were the effects it had on the company? They just mention the stock
tanking which, by itself, is pretty meaningless. I'm assuming people stopped
buying the stuff?

Secondly, why did it have any effect? Who would change their practices because
of this? It really rams home how deeply brands are integrated into our
understanding of value.

How depressing.

~~~
spzb
It became a national joke in the UK. Nobody would be seen dead going into one
of their stores or giving their jewellery as a gift. It basically put them out
of business : [https://www.theguardian.com/business/2014/aug/22/gerald-
ratn...](https://www.theguardian.com/business/2014/aug/22/gerald-ratner-
jewellery-total-crap-1992-archive)

~~~
Axsuul
But did it really put them out of business? They did a re-org as Signet
Jewelers and is now the world's largest retailer of diamonds.

~~~
spzb
As a brand it put Ratners out of business. Your average man in the street
isn't aware of the corporate structures behind the high street brands.

~~~
SomeOtherThrow
That's way less of an exciting headline, though. The company is the only way
to realize the value of a brand, and if the company is still doing fine today,
it considerably weakens the lessons here: it's apparently not even that bad in
the worst case scenario.

~~~
TheCoelacanth
They did manage to salvage the company, but they lost hundreds of millions of
dollars in the process. It was an absolute disaster for them.

------
PhasmaFelis
I think a lot of people, then and now, miss the important takeaway here. It's
not about Ratner or his products; it's about all the other products that we
continue to use and trust every day, because their creators are smart enough
to maintain the lie.

~~~
whenchamenia
Most people on HN just treat it as a cautionary tale, as the implicit lies
that underlie most SV companies are piled high and deep. Everyone knows they
are standing on a rug, and are anxiously looking around for any pulling.

~~~
PhasmaFelis
Yeah, exactly. Whether someone takes this as a lesson for _business owners_
instead of for _consumers_ tells you something about them.

------
Fnoord
Ah yes, the Ratner effect [1]. See also the Osbourne effect [2] and the Elop
effect (which did Nokia no good) [3].

[1]
[https://en.wikipedia.org/wiki/Gerald_Ratner](https://en.wikipedia.org/wiki/Gerald_Ratner)

[2]
[https://en.wikipedia.org/wiki/Osborne_effect](https://en.wikipedia.org/wiki/Osborne_effect)

[3]
[https://en.wikipedia.org/wiki/Stephen_Elop#%22Burning_Platfo...](https://en.wikipedia.org/wiki/Stephen_Elop#%22Burning_Platform%22_memo)

------
hinkley
I don't really have a particular desire to be the public face of any
organization (although, having joined some pretty small groups lately, the
odds of this happening have increased from 0 to >0), but a lot of the other
examples in this article reinforce for me the advice about phrasing your
criticisms constructively or as a value statement.

It's harder for someone to blow them out of proportion or context when they
are phrased that way, although people can still play the hypocrisy card.

------
losvedir
Anyone have data on the Ratner Group's shares prior to Feb '91? I'm sort of
skeptical because the chart begins there. It could have been on a downward
trend anyway.

------
jberm123
Reminds me of the recent Patrick Byrne CEO of Overstock resigning after making
comments he's involved with the deep state (which also crushed Overstock's
stock price): [https://www.cnbc.com/2019/08/22/overstock-ceo-patrick-
byrne-...](https://www.cnbc.com/2019/08/22/overstock-ceo-patrick-byrne-
resigns-following-deep-state-comments.html)

------
xyzal
Ratner apparently bragged too much, which cost his company a fortune, which
apparently was not his intent.

I wonder, if there is a documented case of someone causing similar loss just
for the reason of "having enough" with the pure intent of causing as much
damage as possible or just for causing as much evil/pain as possible. In the
sense of listening to his/hers dark triad temptation.

------
crawfordcomeaux
It's funny how people will paint being honest as a gaffe.

The original gaffe was selling people crap and not telling them it's crap.

~~~
davidgh
Imagine the difference in how you’d feel as a middle-class working guy buying
from them. The CEO could say:

“We work hard to keep our prices low by carefully selecting affordable
materials while still providing stylish, attractive and fashionable products
our customers love.”

...or:

“Our products are crap, the materials in them are crap, and by virtue of
buying them, our customers assert that all they want is crap.”

Producing low cost items is not the issue, and naturally the quality is less
with low cost items. People understood they weren’t buying high-grade
platinum. It’s the expressed sentiment of the company leader was the gaffe.

~~~
TheOtherHobbes
The implied sentiment was "You're poor and I've been treating you as a joke."

The previously implied sentiment was "I'm selling you upmarket glamour at an
affordable price."

Branding isn't about the product, it's about buying a relationship with an
entity that has more power and charisma than you do.

If you change the implied terms of the relationship, you damage the brand's
value.

It's why people get so furious when Apple stiffs them with products that fail
and then fobs them off with poor after-care.

Apple's implied sentiment used to be "You're an important and unusually gifted
person with excellent taste."

After Cook it's more like "We've taken your money. Why are you still here?"

------
bgibbons
Wow...insert foot in mouth. It is pretty unbelievable that today leaders of
immense influence i.e. Elon Musk, others referenced in the article aren't more
careful with what they might put out in a Tweet. Truly amazing.

~~~
WilliamEdward
Musk will say some stupid garbage, but he'd never call his own products crap.
He really believes in them.

~~~
doubleunplussed
Also, the products are not crap. Can't argue with rockets going to space for
cheaper than ever, whatever the CEO says on twitter. Rockets aren't earrings.

------
_-___________-_
Maybe the deeper lesson here isn't so much "don't be indiscreet about how shit
your products are", but rather, "don't work on something you're not proud of".

------
rajacombinator
The key mistake here is not respecting your customers. Unsurprising in an
inherited business, and in many corporations, which are essentially inherited
by promotion.

------
ElijahLynn
Or was it that he decided to come clean, because he felt shame for what he had
done, and didn't mind the consequences?

I think it was unlikely but just posing the question.

------
Phenomenit
Maybe he was fed up and wanted a real exit.

There are other stories of people giving away huge fortunes prehumously
because they might think the money is better used elsewhere.

~~~
dmix
Money isn't a finite resource that "goes elsewhere" if you don't generate it
through business activity. This is probably one of the biggest popular
misconceptions of how business works, that there is only a limited amount of
value to go around, instead of it just being a near unlimited balloon that can
expand or contract.

~~~
Phenomenit
I'm well aware that money moves all the time but giving it away removes the
burden of making "good" and rational decision, especially if you have a lot of
it.

Or Maybe you don't like hanging out with rich people, when you're very rich
you can't hang out with poor people. You can but you have to probably lie
about your wealth.

------
cozzyd
To anyone else similarly confused, this is NOT the same Gerald Ratner for whom
the gym at UChicago is named.

------
dlphn___xyz
“the truth is like poetry and people hate poetry” -steve carell as mark baum

------
JJMcJ
And this is why most corporate communication is so bland and stereotyped.

------
robertheadley
I really enjoyed this one. Thanks for sharing it.

------
Izkata
The speech was in April, and there was an impact from it, but on the chart the
stock didn't start plummeting until September. What's the real story?

~~~
mytailorisrich
The chart shows a 20% drop within 2 weeks.

~~~
Izkata
But only after gaining immediately prior to that, after having already started
a slow tumble a month before. That April spike looks like an outlier gain
during a slow, 4-month decline (March through June).

Over in September and October however, it suddenly dropped about 45% in about
4 weeks, after having nearly stabilized, and then dropped 60% over November.
It absolutely didn't start plummeting until months after he made these jokes.

------
0898
"When Gerald Ratner took the stage before 6k high-powered businesspeople"

The phrase "high-powered" has never sat right with me. It sounds so hand-
wavey.

------
bobharris
Sobering, softening article.

Perspective.

------
mv4
Perception is reality.

------
chenster
Smells like clickbait

------
drummyfish
This is possible only in capitalism, where the demand doesn't come from
people's needs but is simply created by the sellers themselves. I've seen
successful online businesses based on selling people animal feces.

------
anonu
I couldn't help but think of Trump and his superlatives. Lots of people joke
when he says something is "the best" or "the greatest it's ever been". Trump
does this quite a bit with respect to the economy and the markets.

The engineer in me takes things at face value: measured, empirical and framed
in the right context. But I can understand the salesman approach to selling:
you need to promote your product as the best.

This is especially true for the markets where valuations are pretty much
"maxed out" and at all time highs. So the market runs on optimism and future
expectations. The market will go up because I say it will go up! Nothing wrong
with that perspective IMHO - insofar as talking about the markets.

------
imulligan
I see Tesla in the Horizon.

------
mrosett
This article is basically the same story, but more detailed and better-
written:

[https://thehustle.co/gerald-ratners-billion-dollar-
speech](https://thehustle.co/gerald-ratners-billion-dollar-speech)

~~~
dang
OK, we'll change to that from [https://www.businessblogshub.com/2012/09/the-
man-who-destroy...](https://www.businessblogshub.com/2012/09/the-man-who-
destroyed-his-multi-million-dollar-company-in-10-seconds/). Thanks!

------
chucksmash
Interesting anecdote, but holy minimal-effort-article-writing, Batman:

> Have you ever heard of the “Ratner effect”?

> Well by the end of this post you will know what it means.

~~~
mixmastamyk
While long-form writing is an enjoyable endeavor, I appreciate the direct
approach most of the time.

------
spoovy
My dad, a working class man, must have bought my mum jewellery from Ratners in
the 80s, because I remember this scandal and how genuinely furious he was. I
remember him saying to me words along the lines of "of course we know deep
down that it's crap, but it's all we can afford so we kid ourselves that it's
not". Ratner saying out loud that it was crap was destroying people's private
delusions, which is all some people have. It was idiotic of Ratner to say it
and I don't blame the newspapers for printing it at all.

------
draw_down
God forbid a business leader should tell the truth!

------
shmerl
Someone speaks the truth for once, and they call it "the effect". Reminds an
episode it the Water World, where everyone says to Deacon how good his
artificial eye looks (they are too scared of him), and only one kid says "it
looks like sh __*t ".

