The Rise and Fall... and Rise Again

'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."' With those words at the Institute of Directors on April 23, 1991, Gerald Ratner destroyed £500 million in shareholder value and created a new verb: 'to do a Ratner.'

Ratner was CEO of the world's largest jewelry retail group. His joke about cheap merchandise was meant to be self-deprecating humor among business executives. Instead, the media broadcast it to his customers, who didn't find it funny that they'd been buying 'total crap.' Sales collapsed. Shares converted to debt. Within two years, he was fired from his own company, which owed banks £1 billion.

Biologically, this is signal cost catastrophe. Honest signaling requires that signals carry appropriate costs—peacock tails are expensive to grow, warning calls attract predators. But Ratner's signal was inverted: he broadcast low-cost information (internal knowledge about margins) that destroyed high-cost assets (brand reputation built over decades). The signal-to-damage ratio was extraordinary: a few sentences erased years of customer trust.

The lesson isn't 'don't joke about your products.' It's that some information destroys value specifically by becoming public. Internal knowledge about cost structures, quality trade-offs, or customer exploitation must remain compartmentalized. The moment Ratner's customers shared his perspective on the merchandise, they could no longer buy it without embarrassment. He turned private cynicism into public shame.