So yes, I recently got myself a new home server off of eBuyer, and I decided to install Ubuntu on it. After installing various other packages without issue the first to cause problems was Rails (it always would be wouldnt it). Either way, when you try to run…

sudo gem update --system

It goes…

/usr/bin/gem:23: uninitialized constant Gem::GemRunner (NameError)

Which is really useful and does exactly what you want it to.. not. The fix is to go edit the gem file…

/usr/bin/gem

In there, hunt for the line…

require 'rubygems'

…and just after, put this…

require 'rubygems/gem_runner'

Problem solved!