
What the diamond industry is really selling - elorant
http://qz.com/614214/what-the-diamond-industry-is-really-selling/
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bluedevil2k
The diamond industry has a long history of marketing its goods that continues
even today. 20 years ago, an engagement ring was 1 solitaire diamond. Now,
it's much more common to buy a ring with 1 big diamond, 2 smaller ones on the
side, and small diamonds around the ring. That's from marketing (and the lower
cutting costs). 7 years ago, black diamonds were ground up and used on drill
bits and saws, now they're sold in the US as "chocolate diamonds" for a nice
premium. The diamond industry laughs at consumers in the US for that one. You
can see it in the last 2 months as well - there's a big marketing blitz in the
US right now that you need to buy a 2 diamond ring for your woman, one to
symbolize love, the other to symbolize being a best friend. So I guess 1 is no
longer enough. Each culture, naturally, responds to marketing in different
ways. In the US, the marketing push has been to measure love by the size of
the diamond. In Japan, it's measured by the color/clarity of the diamond. In
the US, 2 months salary is the "rule". In Japan, it's 3 months salary.

~~~
JumpCrisscross
> _20 years ago, an engagement ring was 1 solitaire diamond. Now, it 's much
> more common to buy a ring with 1 big diamond, 2 smaller ones on the side,
> and small diamonds around the ring_

My favorite article on the diamond business is this 1982 print from The
Atlantic, "Have You Ever Tried to Sell A Diamond?" [1]. I excerpted two
relevant passages below.

"The diamond market had to be further restructured in the mid-1960s to
accomodate a surfeit of minute diamonds, which De Beers undertook to market
for the Soviets. They had discovered diamond mines in Siberia, after intensive
exploration, in the late 1950s: De Beers and its allies no longer controlled
the diamond supply, and realized that open competition with the Soviets would
inevitably lead, as Harry Oppenheimer gingerly put it, to 'price
fluctuations,' which would weaken the carefully cultivated confidence of the
public in the value of diamonds. Oppenheimer, assuming that neither party
could afford risking the destruction of the diamond invention, offered the
Soviets a straightforward deal -- 'a single channel' for controlling the world
supply of diamonds. In accepting this arrangement, the Soviets became partners
in the cartel, and co-protectors of the diamond invention.

Almost all of the Soviet diamonds were under half a carat in their uncut form,
and there was no ready retail outlet for millions of such tiny diamonds. When
it made its secret deal with the Soviet Union, De Beers had expected
production from the Siberian mines to decrease gradually. Instead, production
accelerated at an incredible pace, and De Beers was forced to reconsider its
sales strategy. De Beers ordered N. W. Ayer to reverse one of its themes:
women were no longer to be led to equate the status and emotional commitment
to an engagement with the sheer size of the diamond. A 'strategy for small
diamond sales' was outlined, stressing the 'importance of quality, color and
cut' over size. Pictures of 'one quarter carat' rings would replace pictures
of 'up to 2 carat' rings. Moreover, the advertising agency began in its
international campaign to 'illustrate gems as small as one-tenth of a carat
and give them the same emotional importance as larger stones.' The news
releases also made clear that women should think of diamonds, regardless of
size, as objects of perfection: a small diamond could be as perfect as a large
diamond.

...

As American consumers became accustomed to the idea of buying smaller
diamonds, they began to perceive larger diamonds as ostentatious. By the
mid-1970s, the advertising campaign for smaller diamonds was beginning to seem
too successful."

[http://www.theatlantic.com/past/issues/82feb/8202diamond1.ht...](http://www.theatlantic.com/past/issues/82feb/8202diamond1.htm)

~~~
bluedevil2k
The big driver for small diamonds (< 0.25 carats) is that the price of
cutting/polishing diamonds has plummeted in the last 10 years. Before then,
diamonds were predominantly cut and polished in Antwerp and Tel Aviv. The
price (measured in $/carat) was around $80. 10 years ago, Surat, India started
to dominate the industry, and the price fell to $10. It's common in Surat for
a family to get a bag of rough in the morning from a company, take it home and
have the entire family cut and polish the bag, and return it for cash at the
end of the day. The result of this price drop is that small diamonds suddenly
become profitable.

There's been other references to the Atlantic article from 1982, but the
diamond industry has changed tremendously in the last 10 years. There's 2 good
books to read about the recent changes: will find their names and edit this
post with links.

* [http://www.rough-polished.com/en/analytics/77889.html](http://www.rough-polished.com/en/analytics/77889.html)

Here's one book - [http://www.amazon.com/Diamond-History-Cold-Blooded-Love-
Affa...](http://www.amazon.com/Diamond-History-Cold-Blooded-Love-
Affair/dp/0452283701/ref=sr_1_6?s=books&ie=UTF8&qid=1455547587&sr=1-6&keywords=diamonds)

Here's the second book - [http://www.amazon.com/The-Heartless-Stone-Journey-
Diamonds/d...](http://www.amazon.com/The-Heartless-Stone-Journey-
Diamonds/dp/0312339690/ref=pd_sim_14_2?ie=UTF8&dpID=51nAjFN8OmL&dpSrc=sims&preST=_AC_UL160_SR102%2C160_&refRID=0EQXAGZRGNF5PSZ40W8S)

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jkraker
The saddest part of the article for me was the ad--"you can't look at Jane and
tell me she's not worth 2 months' salary". There's so much wrong with that
statement. The worst part is that a lot of people buy into it to some extent.

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shasta
Someone should sell an investment-backed artificial diamond ring. So, for
example, you could take a $500 ring and back it with a $10K investment that's
tied to the ring. The only reason anyone buys a real diamond ring is to avoid
the embarrassment of a cheap ring - on the part of the guy giving it or the
woman showing it to her friends. Being able to talk about it as a "$10K ring"
would go a long way to making it less embarrassing.

~~~
SerisCo
That's a great original idea, but it's still predicated on the assumption that
more money = more love, that the purpose of the ring is to impress others, and
that there's reason to be ashamed of a $500 ring.

It's sad that American culture assumes that the man who spends $10K on a ring
loves his fiancée more than the man who spends $500.

Several companies that produce diamond alternatives, such as lab-grown
diamonds and silicon carbide stones, are growing and rapidly expanding their
product lines. I think the reason for this is that people are questioning the
wisdom of spending a ton of money because marketing campaign have told them
they must if they love their partners.

~~~
rayiner
> It's sad that American culture assumes that the man who spends $10K on a
> ring loves his fiancée more than the man who spends $500.

That presupposes that marriage is solely about love, which is itself an odd
and mostly western concept.

Marriage is, just as much, an economic arrangement in which people make often
very significant sacrifices in order to create a household and potentially
raise and support children. It necessarily entails a significant commitment on
both sides, including the commitment to stick with each other in the case of
hardship or sickness. When you account for that aspect of marriage, it makes
total sense to require some showing of financial wherewithal.

~~~
SerisCo
Absolutely, there are considerations other than simply love. And to that
point, I would argue that if a person values "financial wherewithal" in a
partner, they wouldn't require the partner to drop tens of thousands of
dollars on a fun but non-essential trinket.

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rayiner
The article spins a yarn about DeBeers single-handedly inventing the tradition
of giving expensive engagement gifts, but stumbles when it gets to talking
about India, where it has to clumsily avoid mentioning that Indians have been
spending huge amounts of resources on (gold) jewelry for marriages since time
immemorial.

I find a lot of anti-diamond talk hypocritical. Folks who will drop a ton of
money on a fast car that spends 99.9% of its life sitting in traffic suddenly
becoming ascetics when talking about buying diamond jewelry.

~~~
lmm
It feels like the value of a fast car lies in human effort (a previous manager
made a point of showing us a film about McLaren's approach to small-run
production that he felt had lessons for the software industry), which feels
more authentic than cartel-controlled scarcity (particularly when there are
cheaper synthetics of objectively higher quality - no doubt brands like
Ferrari have some premium that's not grounded in their product's technical
merit, but it's never quite so in your face). And I'm not aware of fast-car
smuggling funding wars, or a fast-car-manufacturer cartel sending thugs to
intimidate journalists. (Maybe those things are happening and I'm just unaware
- if so I'd be fascinated to read about them)

~~~
cvarjas
You might find this article by Chris Harris a few years ago interesting. It
describes the journalism environment of Ferrari back then. I believe he was
banned from driving their cars for three years due to this article.

[http://jalopnik.com/5760248/how-ferrari-
spins](http://jalopnik.com/5760248/how-ferrari-spins)

~~~
lmm
Yeah, that aligns with what I've read elsewhere. Not a good look to be sure,
but a long way away from physical violence.

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SeanDav
Having recognized the fact that scarcity and value of diamonds are almost
completely company made constructs, I did not get my wife an engagement ring,
but I did get her a beautiful wedding ring (non-diamond of course). Having a
close mechanical engineering friend involved in the business of artificial
diamond manufacturing, helped make the decision easier as well.

The money saved by this and by having a small wedding, made putting together a
deposit for a house, far easier.

~~~
mcv
Your wife is lucky to have you. You can't live in a diamond ring. Surely a man
who makes sound financial decisions should be far more attractive than one who
falls for silly marketing tricks?

~~~
spacehome
Stereotypically, it's the woman, not the man, who falls for the silly
marketing trick.

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mseebach
Here's an alternative (and actually academic) look at it.

[http://homes.chass.utoronto.ca/~siow/332/rings.pdf](http://homes.chass.utoronto.ca/~siow/332/rings.pdf)

TL;DR, the data doesn't back up the advertising thesis.

~~~
mcv
Is this something that units the US, Japan and China, and distinguishes them
from Europe? I have my doubts.

Also, I don't understand the supposed logic behind a change in marriage law
and a rising demand for diamonds.

~~~
mseebach
So, let's rewind to a world of significantly more socially conservative
attitudes to sex, partly driven by patriarchy, but also very much driven by
the absence of easy-to-access, reliable contraception.

Two young love-birds are getting frisky, guy says "don't worry, I'll marry
you", they get down to business, and then he bails. Poor young girl is now
damaged goods. She's plausibly even pregnant, but even if she's not, her
marriage prospects are down. She can sue the guy for breach of marriage
promise.

Then the law changes, breaching a marriage promise is no longer something you
can sue for. In the same situation, the guy's promise to marry the girl no
longer hold the same weight because she can't sue -- so they come up with a
bond instead: An expensive gift that is forfeited if the guy doesn't keep up
his promise to marry.

~~~
mcv
Interesting theory, however, as far as I know, you can't sue for damages for a
broken engagement in Netherland, yet diamond engagement rings have never taken
off here.

Besides, if you need that kind of collateral before you can trust a guy, maybe
you should be looking for another guy in the first place. It also doesn't
explain why people who don't have premarital sex still want diamond rings.

So all in all, not a great theory.

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mcv
Interesting how the article focuses on the diamond engagement ring market in
the US, Japan and China, but doesn't mention Europe. As far as I'm aware, very
few people use diamond engagement rings here. If engagement comes with a ring
at all, it's generally the future wedding ring, which is traditionally plain
gold.

The idea that people are willing to spend 2 months' salary on a ring is beyond
ludicrous to me.

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iolothebard
First wife got an amazing diamond/platinum ring (and wedding band). Second
wife got a Claddagh ring which cost ~500x less. Whatever makes them happy :-)

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jgalt212
great further reading, from The Atlantic Monthly (1982)

[http://www.theatlantic.com/past/issues/82feb/8202diamond1.ht...](http://www.theatlantic.com/past/issues/82feb/8202diamond1.htm)

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facepalm
What articles like this miss is that useless products like diamonds actually
serve a real need: they enable signalling of commitment. Especially if it
costs several months of income of a potential partner, it might be a
reasonable indicator for a serious investment in the relationship.

You can not achieve the same effect by buying something useful instead,
because then the money would be spent on something useful, not on proving
commitment.

Not saying it is the only way to prove commitment, but "it's all just
marketing" doesn't catch the whole story imo.

~~~
dyeje
But it is all just marketing. Before 1938 no one cared about diamonds, and
people were able to show commitment just fine. If I'm not mistaken, the
divorce rate was also significantly lower.

~~~
BostonEnginerd
The divorce rate was likely lower for many reasons not involving diamonds.

~~~
pbhjpbhj
Marriages may have ended at a faster rate, but due to greater mortality,
maybe?

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dghughes
Our ancestors were drawn to diamonds and gold obviously because of their
sparkle but also their immutable nature; no rust or decay.

But this modern spurn of diamonds reminds me of people who say "I'm a vegan",
"I do Crossfit", "I don't own a TV" if you don't like diamonds don't get one.

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Loic
This post is basically a rewrite of this one from 2013:

[http://priceonomics.com/post/45768546804/diamonds-are-
bullsh...](http://priceonomics.com/post/45768546804/diamonds-are-bullshit)

They could have linked to it I suppose.

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dangerpowpow
what brilliant marketing then

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eximius
Oh, oh, I know this one! Tiny, hard rocks?

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billpg
_bzzz_

Evil.

