The joke that buried a billion-dollar business (8 photos)

The institution of reputation began to exist long before today’s social networks, where a wave of popular anger can fall on a person in a minute for a carelessly spoken word. In times of offline life, reputations collapsed much more slowly and the situation could usually be somehow saved.





But Gerald Ratner was not forgiven for his bad joke.

In 1965, Gerald's father had a fairly modest and fledgling jewelry business. That year, being a fifteen-year-old goofball, expelled from the gymnasium for being “too stupid.” The young man began working in his father’s store, putting things in order, carrying out simple tasks and slowly immersing himself in the basics of his father’s business.



In 1984, Gerald inherited the Ratners Group (aka "Ratners"). There were 120 unremarkable shops, and the company's annual loss was £350. Ratner, by that time, had already thoroughly studied not only the family business, but also how other shops in London did business. Bright shop windows, flashy slogans, sellers shouting, inviting people into their shops. Ratner decided that this strategy would work for the Ratners as well.





For several months, each of the 120 stores was plastered with red and orange posters on which huge letters read "Sale, Sale! Half Price!", "Last Chance - Mega Star Sales!" On each display case you could see the price tag of the product.

Today, in the era of "555" or the endlessly closing "Sunlight", it is unlikely that you will lure anyone with such methods, but in the era of the 1980s it was something new.

Until the 1980s, jewelry and jewelry were something elitist, prestigious, a kind of club closed to the common man. The most common item cost more than 300 pounds (today it’s about $1,000) and the jewelers’ income was based on exclusivity.



Ratner decided to refocus the Ratners network for simpler people. He began offering bracelets, rings, and chains at prices ranging from a couple of pounds to twenty. Gerald rearranged the displays so that cheaper items were prominently displayed, and the diamond rings were placed at the back of the display. Popular music of those times was heard from the speakers.

Needless to say, other jewelers turned against Ratner for dumping prices and selling cheap, bad taste.

And it worked! By 1990, the barely alive company had grown to two thousand stores and conquered half of the jewelry market in England. Annual sales 1.2 billion pounds sterling (profit was 125 million). Ratners bought rival chains Jared and Kay Jewelers.

And so, in a phenomenally short time, Gerald Ratner became very famous not only for his financial support, but also for democratizing the closed and prim jewelry industry.

At the time, Ratner said, "I just felt like I couldn't fail." Actually, it would be very difficult for him to fail. But we remember why Gerald was expelled from the gymnasium?



In 1991, Ratner was invited to speak at the annual convention of the Institute of Directors. This was a very significant event, and gaining admission to which was considered recognition.

Ratner, before his speech, decided to show a draft of his speech to a public speaking consultant, who advised him to add a couple of jokes to break up the dry reporting speech. Make a fool pray to God, as they say...

On April 23, 1991, Gerald Ratner began a speech where he competently emphasized the values ​​of the convention itself - choice, prosperity, quality. Well, after three minutes I decided to add some jokes.

Joke number one:

"Ratners does not represent prosperity - and, when you think about it, has little to do with quality. We make cut glass sherry decanters complete with six glasses on a silver plated tray on which your butler can serve you drinks, all for 4.95 "People say, 'How can you sell this for such a low price?' I say, 'Because it's complete crap.'

The audience looked at each other uncertainly, there was no burst of laughter, but the not particularly sensitive Ratner decided to finish off this punch:

We even sell a pair of gold earrings for less than £1. Some people say: "It's cheap"better than a shrimp sandwich!"...I have to say that the sandwich will probably last longer than these earrings."

This also did not cause the laughter Ratner expected, but he nevertheless finished his speech and left the podium satisfied.



And the very next morning he looked through the newspaper pages with horror, where quotes from his speech ended up. “The head of a jewelry company called his products “crap,” the London media was full of stories.

Gerald tried to somehow turn everything into a joke, holding promotions in the stores of his chain, so that his words would still sound in a humorous connotation. Did not help.

Buyers actively boycotted the company, Gerald had to close several hundred stores, and 25 thousand people lost their jobs. Former fans of the company angrily argued that the owner of the Ratners Group bathes in luxury, rides on yachts and does not hesitate to say that he sells crap to those thanks to whom he has all this luxury.

The brand tried to attribute its fall to a "shift in consumer habits," but all the charts said Ratner's speech was to blame for the catastrophic losses. In less than a week after his devastating speech, Ratners Group shares collapsed by 500 million pounds sterling (if converted to today's exchange rate - 1.8 billion). By the end of the year, shares became cheaper by 80%.

In 1992, Gerald was fired from his post as CEO of the Ratners Group, financiers did not want to deal with him and he was forced to sell his own shares for pennies to pay off his debt to banks (£1 billion). He was left with literally nothing.



For several years he lived the more than modest life of an ordinary person, he even wanted to consult for French jewelry houses, but his reputation preceded him.

In 1997, Ratner took out a loan for 155 thousand pounds sterling, mortgaging his own house, organized a financial business, and then sold it for 3.9 million. After this, Gerald invested the money in an online jewelry company and began transporting cheap jewelry from India to Great Britain.

And the Ratners Group was renamed Signet in 1993 and today they are the world's largest retail diamond seller.

Gerald Ratner literally in 10 seconds was able to do something that will be remembered for decades:

"It doesn't seem to matter that I was Britain's biggest jeweler in the 1980s, with more than 50% of the UK market. My obituary will say I led the business to disaster."

It's ironic that today Ratner often appears as a motivational speaker, and not a cheap one at that.



This situation has become a kind of reputational meme and even the “Ratner effect” has appeared, when the CEO of a company, having an audience of millions on social networks, can blurt out something that will cause serious damage to the company.

For example, John Plutero, CEO of the telecommunications company Cable & Wireless, sent out a memo saying that he considered his company "an underperforming business in a shitty industry."

Lululemon founder Chip Wilson explicitly told customers that his products "do not fit a range of women's bodies."

The ex-CEO of Barclays has dropped an obvious hint that customers shouldn't use the bank's credit card products because they are guaranteed to rack up "a ton of debt."

Ryanair CEO Michael O'Leary said his passengers were "idiots". After some time, he said that clients who demand their money back should simply “fuck off.”

Researchers at Harvard Business School conducted an analysis of misbehavior among corporate executives from 2000 to 2015. On average, as it turned out, one incorrect comment or action led to 250 incriminating news stories. The companies' stock prices fell by 3.1%.

Yes, it is not as catastrophic as what happened to Gerald Ratner, but the frankly stupid words of business leaders spoken publicly had tangible financial consequences.