
A Diamond Market No Longer Controlled By De Beers - lelf
http://www.kitco.com/ind/Zimnisky/2013-06-06-A-Diamond-Market-No-Longer-Controlled-By-De-Beers.html
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digitalengineer
Relevant for those who did not read "Have you ever tried to sell a diamond?
(1982)": "The diamond invention—the creation of the idea that diamonds are
rare and valuable, and are essential signs of esteem—is a relatively recent
development in the history of the diamond trade"
[http://www.theatlantic.com/magazine/archive/1982/02/have-
you...](http://www.theatlantic.com/magazine/archive/1982/02/have-you-ever-
tried-to-sell-a-diamond/304575/)

~~~
sogen
Uupvoted because of the deep insight about the greatest marketing campaign
ever.

~~~
larrys
Some people seem to feel that there is something wrong with marketing that
makes you want a product or service.

As many people with an expensive luxury brand can tell you (whether it's a
handbag or a car) nice things are often nice way beyond what they really are
or what they tangibly provide. (And there is nothing wrong about that..)

Let's call it "the mother test". In other words if you gave a luxury car to
your mother and she didn't know it was a Porsche Panamera Turbo how much
pleasure would she derive out of it over a Toyota Avalon or a Cadillac CTS
(relative to the price differential)?

Put another way if a woman gets a kick out of a Coach handbag how would she
feel if the handbag was a very good (licensed) replica of the Coach instead of
the real thing?

How many people with expensive Chef's kitchens derive pleasure out of them and
actually don't even cook that much? And would rather have a kick ass Chef's
oven rather than a GE oven? Just because the marketing has convinced them of
value?

My point is simply they are happy spending the money and getting what they are
getting and there is nothing wrong or deceptive about that practice.

~~~
aaron695
My understanding is the science currently totally disagrees with this.

People are being fooled into thinking 'things' will make them happy. But the
return is deceptively low aka they are being deceived.

~~~
lukifer
See also: Veblen goods.
[http://en.m.wikipedia.org/wiki/Veblen_good](http://en.m.wikipedia.org/wiki/Veblen_good)

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bluedevil2k
I work at a company that helps companies sell their rough diamonds, so I've
seen the seismic shift in the rough diamond market over the last few years.
There's a common belief amongst those in our area - "the diamond industry has
changed more in the last 5 years than it did in the previous 100". That's
probably an understatement.

The decline in market share can't be understated on its effect on the diamond
industry - DeBeers market share has gone from 90% to 40% in the past 10 years,
and as a result, their pricing power has disappeared.

Before, DeBeers had a take it or leave it price - sight holders essentially
had a choice to accept the price DeBeers offered, or basically go out
business. Now, any company who wants to buy rough diamonds has the ability.
Whereas most people here have commented that the prices of diamonds should
decrease, on the contrary, prices have increased. More people have access to
the diamonds - demand has exploded.

The decline in market power of DeBeers has been an exciting time in the
industry.

If be happy to answer any questions - it's a fascinating industry.

~~~
bane
> Whereas most people here have commented that the prices of diamonds should
> decrease, on the contrary, prices have increased.

Could that just be an effect of an already conditioned market? If I were to
sell diamonds from my own mine, and they were moving at the prices De Beers
set on their product, why wouldn't I keep my price high?

~~~
bluedevil2k
You don't "keep your prices high". Your prices reflect the market price now
(whereas they didn't before). Auctions ensure that the market price is found
by inviting a significant number of participants.

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chc
Then why do used diamonds go for such a small fraction of the price?

~~~
bluedevil2k
Ask your significant other if she wants a diamond that was owned by someone
else before her.

In all seriousness, do not confuse the price of a rough diamond with the price
of a polished diamond at a retail store - there's likely a 100% markup. If you
were to trade in used rough diamonds, you'd find the price close to freshly
mined rough diamonds (though the profit margin for the cutters/polishers is
tiny).

~~~
judk
Your SO would never know the diamond's history if you didn't chose to share
it.

~~~
irq
Nothing says "true love" like jewelry deception...

~~~
CalRobert
If they need a diamond they aren't worth your time.

~~~
jljljl
To be fair, if you promise a diamond but then deceive about it's origin, you
probably aren't worth their time either.

~~~
CalRobert
Eh, just as well then.

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reillyse
The whole diamond industry is rotten to the core. Even the process of tearing
up the ground to get at diamonds is a total waste of time, effort and the
planet. Do a google search for "largest hole in the ground" and you'll see
what a large diamond mine looks like. That's before we even start to consider
blood diamonds.

Do everyone a favor and if you are considering buying a diamond as an
engagement ring, have a chat with your significant other and see how they feel
about lab created diamonds. They are cheaper and much higher quality and leave
everyone happier all round.

~~~
judk
Sadly there are too many otherwise wonderful women who suffer from the
"diamond dogma" just many suffer from the other great marketing campaigns,
such as Christianity.

~~~
CalRobert
If she suffers from this affliction, you could offer to donate the money to a
well-researched charity as it would do more good there than as a status symbol
on her finger. Her response may be illuminating.

~~~
reillyse
Yea, exactly. I'm not suggesting you do it to be cheap and to save money. In
fact I'm pretty sure most girls could think of something to do with the couple
of grand you save, so why spend it on making people unhappy.

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lotsofmangos
Hang on, De-Beers loses control of the diamond market and then the price goes
up? This doesn't look like the market has started being rationally driven by
supply and demand, this looks like someone even more nutty than De-Beers has
successfully staged a coup.

~~~
pyre
Some of those high prices seem like the result of speculation, or people
pouring their money into 'something physical' the same way that market
volatility sometimes ends up with a rise in gold prices.

~~~
hrktb
I thought diamonds have little to no resale value, or is there other ways to
speculate or use them as a something valuable ?

~~~
zaroth
How can a diamond be "used"? I think it's only the person offering to buy it
trying to convince you of this.

Diamonds are cheap and easy to appraise, and with laser etching easy to
identify. I buy all my ice with AGL certs off eBay.

There are more degrees of freedom than with something like gold coins, so
diamonds aren't fungible. It adds complexity but I don't think it hurts resale
that badly.

If the resale market were so much cheaper, that's where everyone would buy
their stones, right?

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Theodores
What is not mentioned in this story is the Kimberley Process Certification
Scheme that started in 2003. This was as a result of concern about 'conflict
diamonds'.

Essentially, if you bought through De Beers then you had a 'conflict free'
diamond, with a diamond from anyone else then you were taking your chances.
Although the KPCS had noble intentions it also was a means of controlling the
market.

Maybe that is why we had concern about 'conflict diamonds' in the first place
- De Beers needed a new way of controlling the market and it ties in with a
lot of the narrative presented here.

~~~
iwwr
> Although the KPCS had noble intentions it also was a means of controlling
> the market.

De Beers used the film Blood Diamond with DiCaprio as a positive marketing
tool (they bought advertising with it -- 'De Beers presents...'). It
popularized the notion of 'conflict diamonds' and then they calm the fears of
their customers with the certification mechanism. More importantly, it creates
legal opening for countries to ban the trade in non-certified diamonds.

~~~
judk
Are there reliable independent audits of DeBeers conflict-free claims, or are
they just lying about it-- another facet of their monopolistic jewel of a
business?

Ah, found it: KPCS only covers diamonds traded for weapons, it doesn't cover
slave/child labor, environmental abuse, or any other crimes committed during
mining for DeBeers diamonds.

[http://en.m.wikipedia.org/wiki/Kimberley_Process_Certificati...](http://en.m.wikipedia.org/wiki/Kimberley_Process_Certification_Scheme)

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sandycheeks
Didn't the RSS James Cook find a bunch of diamonds where the mantle is exposed
beneath the Atlantic back in 2007?

I remember following this as an amateur geologist but never heard anything
more after the diary entry found here...

[http://www.classroomatsea.net/JC007/diary/diary_12-04.html](http://www.classroomatsea.net/JC007/diary/diary_12-04.html)

I assumed this would have a significant effect on the supply since they
indicated that they got over 150 carats simply by dragging a bucket across the
sea floor.

~~~
johnchristopher
I woulnd't hold my breath too much:

> But before that, as the First of April passed into the Second, and then to
> the Third, our delight turned from scientific wonder, to greed, and finally
> to suspicion concerning the amazingly prolific haul of gems from the abyss.

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FreeKill
Interesting, I wonder if this will ultimately lead to a competitive
environment where prices decline due to competition? I've read it elsewhere
before, but I believe diamonds are only "rare" due to strict control of what
comes to market. Will be interesting to see if this affects that strict
control.

This is especially interesting considering Tiffiany's earning reports this
week which showed a substantial part of their post recessions profits is now
in the low end consumer goods.

~~~
pizza234
I personally think that the price of the diamonds is almost exclusively
determined by the marketing success.

One very interesting bit in the article somebody's mentioned about De Beers
story is that artificial diamonds are already cheaper than natural ones, and
virtually undistinguishable. De Beer's response has been to produce machines
than can distinguish natural diamonds from artificial ones.

My conclusion is that people who wants diamonds want simply something
expensive, as status symbol. They don't want a shiny rock at the most
reasonable price, otherwise, it wouldn't be a status symbol anymore.

If prices would fell, the perception of diamonds would change drastically, and
I don't think that the industry (cartel or not) is going to allow that.

~~~
bane
> My conclusion is that people who wants diamonds want simply something
> expensive, as status symbol. They don't want a shiny rock at the most
> reasonable price, otherwise, it wouldn't be a status symbol anymore.

Right, until recently, it's been a hard to fake McGuffin. A small, highly
portable thing you can point at to demonstrate wealth (or the appearance of
wealth).

~~~
judk
Destroying the diamond's ability be "prof of disposed funds" will be an
unmitigated good for humankind. Only the louts in the diamond business will
suffer, in proportion to how deeply they are tied to the vicious evil aspects
of the enterprise.

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return0
If they 're not scarce they 're not going to be very valuable as status
symbols. It seems like de Beers will take the market to its grave with them.

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ginko
Good.

The sooner we can get rid of the diamond lobby the sooner we can use diamond
for actually useful applications.

~~~
return0
Aren't we already? Only utility i know is cutting glass.

~~~
Intermernet
Apart from the thermal properties mentioned already, and other more esoteric
uses, they also happen to be _really_ strong, and if we can scale up our
manufacturing processes, they should become quite cheap as well.

Imagine all of the applications for a transparent material stronger than
steel! We're a way off yet, but it's feasible.

~~~
return0
Harder, but not stronger than steel. Steel doesnt shatter

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frozenport
>>Historically the diamond industry was structurally flawed -the De Beers
monopoly controlled prices.

Nonsense! With no utility, De Beers' monopoly is the only reason why these
objects have value.

~~~
danmaz74
Diamonds are an incredibly important status symbol, especially for women. That
has value.

~~~
zanny
A completely arbitrary value that only requires a critical mass of women to
being valuing some other arbitrary gauge of status as a surrogate. Consider
how in the last few years owning Apple products has become its own perverse
symbol of status, because Apple played an extremely effective rebranding
campaign.

~~~
rhizome
It's not arbitrary, though. Like all values, they are derived from an
exchange. And to be fair, Apple's popularity is not only as a status symbol.
For many people they provide a well-priced combination of features, sometimes
_extremely_ well-priced. A MacBook Air by any other company costs at least 50%
more. If anything, your comment illustrates that Apple is _saddled_ by their
old reputation as having overpriced offerings, _despite_ shifts of focus in
their marketing campaigns.

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joering2
Mandatory article (that was commented on HN a while ago):
[http://blog.priceonomics.com/post/45768546804/diamonds-
are-b...](http://blog.priceonomics.com/post/45768546804/diamonds-are-bullshit)

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chromaton
This articles mentions current diamond prices and even shows a graph of prices
over time. My understanding was that there has not been a real market for
diamonds, and thus, nobody was able to show an accurate price.

Where is this price data coming from? Is there now a market where you can buy
e.g. diamond futures contracts?

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sergers
Wass just reading a _new_ article regarding debeers and how majority ownership
has changed after near a century of ownership by one family.

Debeers plans to raise costs 5% ever yearn for at least next 10 years to hit
profit targets. So they must be doing good if now majority of market undercuts
them literally.

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balladeer
The title almost feels like "a world economy no longer controlled by (or,
centred around) US or $"

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jds375
I wonder if the price will ever become so low and diamonds so common for
consumers that the 'diamond ring engagement' trend starts to disappear.

~~~
erikb
You can start with engaging with another present that shows something more
important to your girl than a simple ring that every other girl has.

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chulk90
This is actually very old news...

