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Your first mistake is installing Rails. You're second mistake is attempting to do so on your development machine and not in a jail or vm.

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Not sure why you'd recommend installing Rails in a VM? It's a framework, not an environment.

You want development to match production as closely as possible, otherwise you're setting yourself up for nasty surprises down the line.

I found using a staging environment that is a clone of production to trump developing in a vm. All code goes through staging before production so there is no surprises

No, you want testing to match production as closely as possible.

Much of the time, development can be done in all sorts of ways that needs little connection to the final production environment.

DHH, the creator of Rails, and the team at 37 Signals (the company behind it), install Rails on their development machines, (with Pow: http://pow.cx/ ).

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