“A diamond is forever” . . . why is a “used” diamond worthless?
I wondered about that. Pre-owned diamond jewelry can be bought on Ebay. The prices aren’t worthless (say 200 dollars for a nice engagement ring) but yes, prices don’t compare to the 1500 -2000 dollars such a ring costs new in a fancy store.
Heirloom diamonds were generally hand cut. With rare exceptions, these diamonds don’t look as nice as the more precisely cut ones of today, which are cut by laser.
Diamonds weren’t as accessible then either, so they tended to be smaller, less clear, and less colorless when purchased by average buyers in average jewelry stores.
The longshot of all of this is that your grandmother’s prized engagement ring would be rejected as junk by nearly any woman in her twenties today (excepting, of course, sentimental value). Sad, but true.
I worked for a industrial tool company.
Diamond cutting tools and abrasives are almost all synthethic. It’s a coating a few microns thick put on as a sinstered powder.
Once upon a time it was real low grade diamonds but the synthetic stuff is much easier to make into useful tools.
The other stick they have is that they control the steady sources of diamonds. Any jeweler who buys from a non-cartel source will be cut off from all future cartel sales. So a jeweler who might be tempted by a better offer today has to think about the diamonds he’ll need to buy next year.
The Canadian suppliers will probably join in with De Beers (the Soviet/Russian suppliers did) because as diamond suppliers it benefits them to have an artificially high price on diamonds.
A rational counter-argument won’t matter if the emotional impact is strong enough.
Obviously, this will stop working once machine-grown gem-quality diamonds can seriously undercut DeBeers prices. As mentioned, distributors toe the DeBeers line because if they don’t, they’ll never get any DeBeers diamonds. Once the guys with machines can assure them of a cheap and steady supply, that threat work any more. It’s not like DeBeers controls the world supply of carbon. They can try to shore it up with marketing, but it’s unlikely to work in the long run. The fact is that small shiny stones make very poor branded products: the only way to mark it as “approved” is to do so very small, where no one could see it. Once “low-class” people can buy big shiny multi-caret rocks for <$100, there goes the status symbol.
Traditionally, DeBeers has also attacked competitors’ financing. The only way to amass a substantial stockpile of diamonds in an attempt to break the cartel is to have some pretty powerful money behind you. DeBeers can dump diamonds for a brief period of time to make their financing sufficiently shaky.
This is where I lose track of the DeBeers business model-
They maintain an artificially inflated price by restricting the supply- and when others threaten to sell below price, they… dump diamonds onto the market at an even lower price. How does this not drive the overall price down over time?
Is the diamond market so focused on scheduled purchases like engagement rings that it can bear fluctuation? Or do these market flooding events not even show up in the retail price?
Is there any actual economic study of how the cartel works? So far, most of what I’ve seen is of the ‘I just know it to be true’ variety.
Not saying I don’t believe that the price is fixed, just that I personally only know that I’ve been told by a lot of people in the past that it is fixed - and I’ve come to distrust this sort of common wisdom, as it as often as not turns out to be a form of urban myth-making.
For example, I hear all the time about artifical diamonds, diamonds found in Canada, etc. How can a cartel keep the price up in the face of all that?
Well they mostly threaten to dump the diamonds. The idea is that if I a small diamond producer wants to undercut De Beers by say 30%. De Beers can lower their prices by say 40%. At 40% lower prices I cannot make a profit and go out of business. At which time De Beers can bring their prices back to normal. The reality is that the only threaten to do this.
If Blood Diamond is even remotely accurate at all (and I suspect it is more realistic than not), the cost of any diamond is far too high.
I get my shiny from Swarovski - their lead crystal is beautiful.
Yeah, are there any decent cites? This thread is virtually citeless. Their business model, as described, doesn’t even make sense to me. I’m not saying that DeBeer’s aren’t the scum of the earth, but the only people I’ve heard ranting about them in real life are far left student groups, who let’s say, are less than reliable.
Marketing is one huge factor, I’d say. The industry has been very sucessful in marketing the idea that for certain occasions a diamond is expected, nay required.
On a wedding-related board I frequent, a poster is currently asking advice because her fiance became upset when she told him she didn’t want a diamond (she requested CZ). He told her he “had to” buy a diamond otherwise he was, well basically, less of a man.
I mean, titanium and palladium haven’t exactly put platinum out of business either, even though they are visually indistinguishable except by the trained eye and far cheaper. Platinum is “the best” so people will pay more, just to say they did. A natural diamond is “real” but a manufactured diamond is “fake.” And a used diamond? It’s practically hexed.
Yes, but ‘clever luxury advertising creates marketing demand’ isn’t the same thing as ‘a cartel is artificially keeping the price high’.
Only by falsely introducing the synthetic diamonds into the market as natural stones could it work. Mined gems are always, always considered superior to synthetics, even if the latter are identical in appearance and chemical properties. This is probably because part of the mystique of gemstones is that they do come from the earth.
How common are natural diamonds, anyway? DeBeers may be inflating the price, but they are still very rare, aren’t they? Otherwise they would not have become the standard for “preciousness” that they have.
Canada diamonds are just as cartelish (cartelly, cartel-like?) as DeBeers. They are equally as expensive, exploiting the market by sustaining a false scarcity to boost prices. If Canada diamonds were truly DeBeers-breaking, they would wildly undercut the market price.
The first company that has the balls to put a little box of diamonds for $9.99 next to the TV Guide and Tic Tacs on the impulse-shelf of the supermarket checkout will be the ones to break the cartel.
The trick is Debeers figured out how to control both supply and demand (throuoh marketing). That puts them in the catbird seat, no? Interesting Atlantic article on the subject.
As to rarity, diamonds are not particularly rare. Historically, good quality rubies and sapphires were more rare than diamonds. This site gives some background. My engagement ring has a Tsavorite garnet in it, similar in color and cost to the one pictured here (except mine is “eye clear” grade VS) – its much more rare than a diamond and a lot less expensive (prettier too).
Well, the interesting part of this 1982 article is its predictive power.
Since 1982, major new discoveries have been found - Canada has gone from having no diamond mines, to being a large producer of diamonds. Why haven’t diamond prices collapsed as predicted?
It simply seems odd to me that a 19th century cartel can still have such sway, even though they lack actual control over major sources of production. The economics of it are odd.
No doubt the industry has pulled off a miracle of marketing, but that in itself isn’t objectionable in the same way as the notion that they conspire to eliminate competition.
The big problem is that there are not many people who really want the cost of diamonds to go down. It is already possible to buy things that sparkle like diamonds. It takes a trained eye and close examination to tell the difference between diamonds and cubic zirconium. The people who already own jewelry don’t really want it to go down in value. A big point of diamonds are that they are a status symbol. That go away if they are cheap and common.
So the main group of people who want cheap diamonds are young guys shopping for engagement rings. And even they will probably be in the market for something else if the cost plummets.
A fact not realized by most people is that large rubies of high quality often are more expensive than diamonds even today, even with the machinations of DeBeers. If you go to a jewelry store, you’ll probably see many two-carat diamonds out on display; if you want to see a ruby that size, the salesperson will probably have to get it from the safe in back, if they have it.