Would you hire the Sultan of Bling?

 In Insights, Realizer Blog

Gerald Ratner, the so-called Sultan of Bling, single-handedly destroyed £500m of shareholder value in his jewellery company with one ill-advised comment during a speech to a director’s conference in 1991. At least that’s how the story is told.

Ratner was the CEO of his family’s incredibly successful jewellery chain which had revolutionised the industry in the UK with amazingly low prices, pop music in store and fluorescent SALE posters everywhere. The public loved it and he grew the chain to 1000 stores.

Then in 1991, at a speech at the Institute of Directors, he commented, “We also do cut-glass sherry decanters complete with six glasses on a silver-plated tray that your butler can serve you drinks on, all for £4.95. People say, “How can you sell this for such a low price?”, I say, “because it’s total crap.”

Ratner was unaware that there was a journalist in the room, who took exception to him making fun of his customers and making a fortune off the back of it.

Next day he was on the front page of the Sun. Not a place that anyone really wants to see themself in lights, unless you are a particular fan of public humiliation.

ratner sun headlineThis speech is now infamous. It coined the phrase “Doing a Ratner” and is listed at number 1 in lists of marketing disasters. Ratner himself says, “I’m a media case study now. ‘Doing a Ratner’ still comes top of the worst decisions ever.”

But here’s the thing, I don’t think this was a decision. This was an off the cuff remark, a piece of humour which went horribly wrong. I don’t think you can really class this as conscious decision making, or something that could have been foreseen.

What I think is interesting though is what happened afterwards. In the immediate aftermath, the bandwagon steamed ahead, the public boycotted the stores, and £500m was wiped off the company’s value. Then, Ratner had to resign and the firm changed its name to Signet.

Subsequently, Ratner applied to 20 firms for a job and got 20 rejections. This is what I find fascinating. This guy had built up his business, turned it into the biggest jewellery company in the world with £120m in profit. He had revolutionised the jewellery business. And then he makes 1 mistake and he’s toast.

I think this is an example of two psychological effects: the halo effect and the hindsight bias.

The halo effect is where we extrapolate from one action that a person must be awful at everything.

And the hindsight bias is where we completely revise our opinions based on recent facts and are unable to recall what we thought previously.

How can you really go from hero to villain in an instant? How does your halo change so drastically? Well, there is a huge role of luck here which isn’t generally recognised. Humans are not at all good at accepting that sometimes things just happen. This is why many of us believe in fate and destiny. Our minds always infer a cause.

So rather than assuming that here is an incredibly successful businessman who got unlucky one time, we impute all sorts of terrible characteristics to Ratner. The halo turns to devils horns. And everyone refuses to hire him.

For what it’s worth, I would have hired him in a heart beat. Wherever there are biases, there are opportunities for those who can see past them.

And what happened to Ratner you ask? He has gone on to successfully build a number of businesses, including a gym business and an online jewellery business, geraldonline.com.

Posted by Rob Pyne