The Diamond Industry
A once monopolized industry that continues to profit from consumers trained over several decades of price fixing and slick marketing. However, the “Diamond Invention” is far more than a monopoly for fixing diamond prices; it is a mechanism for converting tiny crystals of carbon into universally recognized tokens of wealth, power, and romance. To achieve this goal, De Beers had to control demand as well as supply.
The price of a diamond has been artificially inflated since the 1880?s via the De Beers diamond cartel. Up until the mid-1800s, diamonds were rare and only found in a few riverbeds in India and the juggles of Brazil, and the entire world production of diamonds amounted to only a few pounds a year. However, the diamond rush that began in South Africa in the second half of the 19th century flooded the market with diamonds, which, as any good businessman knows, kills demand. Miners realized that their investment was endangered; diamond had a little intrinsic value and there price depended almost entirely on their scarcity.
It would take some ingenious plotting and advertising to keep the diamond’s reputation as intrinsically valuable and desirable, which is where De Beers comes in.
Through advertising, men were convinced that the size of the diamond in an engagement ring showed how much they loved their fiancée. The ring should also cost a minimum of two month’s salary and you should spend as much on a ring as you can afford. Does this seem wise? Unfortunately, this is a century old marketing plan we are still buying into.
"I must be the devil incarnate, the antichrist...I am Chairman of De Beers." - Nicky Oppenheimer
There is no question that the beauty of a diamond is rare. The thought that they are so rare, that demand far surpasses supply, thereby justifying higher value and prices is merely a mirage. The history of the tightly controlled supply chain is well-established.
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Some industry leaders like Rapaport, a major trade source for diamond prices, are working toward a standardization that would bring transparency to the pricing of diamonds. The diamond jewelry trade is fairly unified in claiming that this cannot be accomplished. Taking an adamant stance that diamonds cannot be considered a commodity, while by most definitions they can, the trade insists that each diamond is too unique and that standardization cannot account for the diamonds symbolic value of “enduring love and commitment” (which they believe, and they better since they spent millions in advertising to convince consumers of this notion). The implied thought is that diamonds are nearly priceless and that their value would not hold should they be traded as a commodity.
Anyone who has paid attention to the price of gold is aware that commodities can still be valuable while being transparent in their pricing and at the same time offer resale value to the buyer. Under that scenario the value does not remain solely in the hands of the suppliers, but also now benefits the buyer who garners some resale value—oh wait, maybe that’s not the intended outcome. Symbols of love are meaningful, however, as consumers our emotions should not blind us. A recent class action law-suit ruling testifies to the misleading advertising and unfair pricing that marks the diamond trade.
“There is sufficiency in the world for man’s need, but not for man’s greed.” - Ghandi
Could any metrics for determining a diamond’s value account for impact on the environment, inequitably compensated diamond mining communities, or the tragedies supported by conflict diamonds that continue to find their way into the supply chain? Only you can determine what value you will place on a symbol of commitment, but you must ask yourself “at what cost?”
Civil wars have further resulted in economic collapse; Somalia, Burma (Myanmar), Uganda, Liberia, Sierra Leone, and Angola are examples of nations that were considered to have promising futures before being engulfed in civil wars.