Lessons from Ratner...
Podcast bonus content + Tech round-up + Rough + Top Gun: Maverick
Hello everyone and welcome to the latest edition of Off to Lunch. We seem to have finally achieved some stability in the UK. The new prime minister has got through three days without any real drama and the Autumn Statement has been delayed from October 31 to November 17. City traders are talking about a “dullness dividend”, with the appointment of Rishi Sunak and his chancellor Jeremy Hunt leading to a calming of markets and a slight drop in UK borrowing costs. With that being the case, I wanted to start today’s newsletter with a look at the latest episode of our Business Studies podcast before rounding up some of the extraordinary and important news that has come out of the tech industry this week….
Episode five of Business Studies features an interview with Gerald Ratner. It looks at Ratner’s extraordinary downfall after he made a speech in 1991 in which he described one of his company’s products as “crap”. At the time of the speech, Ratners was the largest jewellery retailer in the world and the owner of H Samuel, Ernest Jones, Watches of Switzerland and more.
Ratner talks about the speech itself, the immediate aftermath, his life afterwards and the lessons from what happened. His recounting of the speech and build-up is fascinating. It includes startling details like the fact he had made the joke about his products before, that directors of the company had seen the speech in advance (one even suggested that Ratner inserted jokes) and that Ratner did not realise there was a problem until he saw the front pages of the Daily Mirror and The Sun the following morning. For those interested in seeing the speech, you can actually watch it in full on YouTube courtesy of the Institute of Directors…
I wanted to speak to Ratner and cover what happened because it is such an extraordinary story - a personal story as much as a business story. But also to explore whether events were as straightforward as they are often portrayed and whether we have learned the right lessons.
The story of Ratner and his speech is frequently used as an example of why leaders - in business and beyond - should be careful about what they say in public and never criticise their own brand or products. However, as Ratner says, he had made these jokes before. Also, the company had problems that may have eventually led to trouble anyway - such as the debt it had taken on and the recession in the UK which had hurt most of the high street. It’s also important to note that the company and most of its brands lived on. Signet, the owner of H Samuel and Ernest Jones, is listed in the US and worth $3 billion. Watches of Switzerland is listed in the UK and worth £2 billion.
The speech clearly was central to what happened to Ratners and the company was clearly in deep trouble afterwards - its share price fell from £4.20 to 2p amid tumbling sales and a breach of banking covenants. The Ratners name disappeared as a brand and the company name. Ratner himself was fired - ironically by the chairman he had appointed to try to help him. He never returned as the boss of a big business.
I think the main lessons to be learned from the story are about brands and happiness. On brands, what happened to Ratners shows that when you put a personal brand at the centre of a business - Ratner himself - that person can eventually have a negative impact that unwinds much - if not all - of the positive impact they had. Secondly, it is often pointed out that brands and reputations are hard-won and easily lost. This story demonstrates that but also shows how a brand can spiral out-of-control quickly, making its downfall impossible to stop. Ratner insists he only joked about one product being crap - the £4.99 sherry decanter - and that was to emphasise how they were able to sell it for that price. Ratner says he spent most of the speech emphasising the quality of his business and its products. But he could not stop the narrative that took hold that he had been laughing at his customers behind their backs for buying his products when they were rubbish. He explains with devastating clarity how destructive this was for his jewellery brands:
The best advertising you can get is when a young girl has just got engaged and she goes back to the office and she shows all her friends the engagement ring on her finger. Before the speech she would say: “I got it from Ratners.” And people would say: “Oh, that's fabulous. They're the biggest jewellers, they're the best jewellers.” After the speech, no way could anyone say that I bought my engagement ring from Ratners because somebody would say: “Well, it's crap.”
On happiness, Ratner was honest when reflecting on the different paths his life could have taken and the “sliding doors” moment of that speech. He talks about the struggles in his life afterwards and taking antidepressants but also how he then went on to build new businesses, go into public speaking and mentoring, and now feels happier than he did before:
I've accepted that I've paid a big price for that joke. Although I have lost all of those things, I've got nothing to complain about compared to most people. I've got a very nice life today. I don't know whether I would have had all that money, all those houses and been happy because it's a very difficult thing to achieve. It's basically to appreciate what you've got. You don't need a huge amount of possessions - it just becomes self-gratification. You don't need all of those things to be happy. I'm happy with what I've got. My income is nothing like what it used to be, but because I appreciate it much more it does make you happy, and that's really all that matters.
If you haven’t listened to the episode yet you can listen here on Substack, here on Apple and here on Spotify.
Tech round-up…
It’s been an extraordinary week of news in the tech industry and I wanted to pull out the key lines in a simple format for you…
As you may have already heard, Elon Musk has completed his deal to buy Twitter for $44 billion and reportedly got rid of the top executives, such as chief executive Parag Agrawal, already. This isn’t a surprise given that Musk has made it clear he wants to overhaul Twitter’s strategy. More here.
