I've known about this monopoly for a while, and so has she. Heck, one of the first movies we watched together when we first started dating 7 years ago was Blood Diamond. Here's the conversation we had while in the jewellery store tonight.
Me: "Sweety, I really don't want to buy you a diamond. I really would rather buy you something that at least has some more value associated with it, like a sapphire."
Her: "Well, I've always pictured a diamond ring. That's what everyone gets."
Me: "Well, what do you like about the diamond that the sapphire doesn't give you?"
Her: "I like the sparkle."
Me: "Ok, that's fair. What about moissanite? (Link: http://en.wikipedia.org/wiki/Moissanite) It's supposedly even more sparkly and brilliant than diamonds."
Her: "What's it made of?"
Me: "You know how diamond is just carbon? Moissanite is silicon and carbon in the same type of crystal structure."
Her: "And it's natural?"
Me: "Well, it can occur naturally, but it's extremely rare. So the ones you buy are usually created in a lab, but are more brilliant than a diamond, but actually cost less. I can apparently get a 1.5 carat stone for $800."
Her: (annoyed) "I don't want something fake!"
Me: "Oh, so it's not about the sparkle then?"
I swear, De Beers has probably pulled off the greatest marketing stunt in the history of humanity. The fact that it's so ingrained in our minds, to the point where a smart, educated, and informed person like my girlfriend still wants a diamond even after knowing all the issues with them, is fascinating.
Honestly, as a community of people in the startup ecosystem, we could stand to learn a thing or two here.
You did not sell her a product which would make her the envy of her girlfriends. "Cheaper than their rings" is the opposite of a victory condition. Don't sell cheap. Sell authentic, sell natural, sell one-of-a-kind, sell meaning, sell status, sell a story, etc.
There turns out to be an arbitrage opportunity in social status for, say, middle or upper-middle class Japanese women. Anybody can buy rocks, but nobody can buy a man vacation, so a man who demonstrates ability to take long vacations must be able to buy virtually unlimited amounts of rocks. Regardless of whether I can afford rocks, I can afford long vacations quite easily, so we announced a small rock and a long honeymoon on the same day.
It's absolutely unreal how effective that was. All relevant stakeholders believe I'm unreasonably well-off. Ironically, this caused them to sharply upgrade their estimations of what the (quite modest) ring must be worth.
My wife wears a moissanite ring, which she loves. The deciding factor was that we could afford a unique custom-designed setting if we went with moissanite. The same ring with diamonds would have been more expensive by at least a factor of ten.
My wife worked in high-end bridal in NYC for a few years, and rings were always a topic of conversation. The amount of times prospects noticed the stones in her ring were moissanite: zero. The setting sends a stronger signal, and it's less expensive. To echo patio, people who saw the ring assumed I was unreasonably well off, when the true total price was less than the latest MacBook.
Paying up for "perfect" diamonds is a complete waste of money from a signaling standpoint. Spend on the setting and design, not the stones.
This isn't to say that you're not right on from a signaling standpoint, just that if you think you might have the need to resell the ring in the future (or perhaps borrow against it), you're better off getting a better stone than a fancier setting.
The stone is another story. It's very easy to resell/reuse good stones, although as the article indicates, the value you'll be able to recoup isn't exactly great.
I was thinking you'd lose money either way if you went with diamond vs. non-diamond, so "you'll lose value" is not a compelling argument for non-diamond.
Polishing will make it smaller by about half, and at least I cannot judge the purity and value of a raw diamond just like that, but the story and experience of getting it and the knowledge of its ethical origin are enough of offset that in my opinion.
edit: If anyone needs directions, just ask.
I have been thinking recently of an anniversary gift that would represent my personality. I'd like to get a ring of iridium. It's one of the most noble metals (platinum group), being the most corrosion resistant of all. It's very lustrous, with a dark gray color. It's very hard, thus scratch resistant. And it comes from SPACE!
Basically: sell it better than De Beers has been doing for over half a century.
i.e. best of luck!
Your advantages: you actually know the girl, you apparently know what makes her tick well enough to make her fall in love with you, you know everyone in her Circle of Girlfriends reference set (or would if you cared to), you're not a sclerotic megacorp, you've got copious permission marketing assets to her and her CoGs, and you've actually got a soul, which should count for something.
Besides, this is HN. Scrappy startup versus megacorp which hasn't innovated since the first world war? Oooooh, bring it, this should be fun.
Yup. Bang on.
Apple does a line in 'oh, but you didn't get an Apple' better than anyone else (they aren't a startup but once were)
>I swear, De Beers has probably pulled off the greatest marketing stunt in the history of humanity
The Australian Meat & Livestock board came up with a marketing idea. On Australia Day, which falls in the middle of Summer, it's very popular to have a family barbecue.
About 8 or 9 years ago, they came up with the idea that it was an Australian tradition to put lamb chops on the barbecue for Australia day. Now, I've been around for a few Australia days myself, and I can tell you it's never been a tradition at all.
But they got a popular former football player to start running ads (in a humorous manner) to say it was 'unAustralian' not to have Lamb Chops on the Barbecue for Australia day. The actual tagline is 'Don't be unAustralian, serve Lamb on Australia day'.
It has been a big success, and now they release pop singles on YouTube and generally create a 'big suspense' to see what they will do this year.
Overall, it's been a massive success, and in just a short time, if you arrive at an Australia day barbecue, it would be surprising to not find Lamp Chops sizzling away. In another decade, it will just be one of those societal norms that will require very little advertising to keep it going.
So, these types of stunts find success when the right pieces fall together. Definitely a lot to learn for the budding startup.
* What do you eat on Christmas Day? A (very specific style of) cake, and KFC.
* Valentines day is for girls to give guys chocolates. Guys give girls chocolates on White Day (March 12th)..
I think the best one is the temples - they sell what's known as a Shimekazari on new years (a kind of wreath). You have to destroy it and buy a new one each year, and it has to be a more expensive one than last years. Nice business if you can get it.
Fathers' Day: 1972
That is not to defend the actual traditions of Christmas though.
I do find it ironic though how barbecues are considered to be an Australian tradition. But then the most well known brand for barbecues, Weber is American.
The issue centres around the social stigma of not having a diamond ring. Friends and family will ask what the stone is, and need to be educated. And no matter what you tell them, the perception will be that I was too cheap to buy her a real engagement ring. Nevermind the fact that I'm not actually saving any money, I'm just spending it somewhat more wisely.
It's actually a little bit of a stressful situation for me. I'm in the Royal Canadian Mint's MintChip Challenge, and I'm hoping to win some gold from the competition, so I can melt it down and make an engagement ring for her from that. In my eyes, that has more meaning behind it. Moreover, she's going on a trip with her sister to Prague & Rome in a month, a few days before our 7 year anniversary. Since she knows a proposal is coming, I was hoping to surprise her by showing up in Rome and proposing to her there. May not be the wisest way to spend my money, especially when I'm not exactly swimming in cash right now, but I felt it would be worth it for the memory and moment. To me, that's a better use for my money than some artificially-valued diamond. Seems like I'll have to scrap that plan and save more money for the ring she wants.
You can request Canadian diamonds at the jewelry store. My store had to overnight a collection in for us to look at, but it wasn't an issue for either of us.
Canada's diamond mines have labor and environmental standards to abide by and Canadian diamonds are laser inscribed with a goose logo and come with an extra certification being from Canada. De Beers does own 2 out of the 6 mines in Canada, but it does not have anything near a monopoly there.
Short version: do not do this, for it will rebound on you horribly.
I would be extremely hesitant about using that particular gambit.
This is as Micro as it gets. And why do you think oppurtunity cost is restricted to Macro?
Symbolizing the triumph of technology and human progress is not really the ideal for an engagement ring, but it's a lot better than symbolizing blood and oppression (depending, I suppose, on your views on marriage, but given that you were looking at engagement rings I expect yours are favorable...)
My wife has a lab-grown emerald from GreenKarat (http://greenkarat.com) on her finger, and she's very happy with it. She was even more opposed to diamonds than I was, going in (I think they look nice, just not worth the money or ethics, she doesn't like the look either). But yeah, for the record, "That's what everyone gets" is off by at least one!
If her heart is really set on the diamond, the best option is a ring in your family or hers, if one exists. Failing that, vintage rings you can find at estate sales and the like may be a more ethical approach than buying new diamonds. They'll have a bloody history but at least you're not adding to demand that will spur new bloodshed. "Ethical" diamonds sold presently in jewelry stores, per my understanding, are better than they were 10 years ago, but the Kimberley Process still has issues.
De Beers has the advantage of selling a luxury good. The point of buying a diamond is to demonstrate one's financial ability. People don't really want cheap diamonds.
I doubt their marketing campaign is a good pattern for normal products.
Which is rather like what they did.
Cars are an area where this is really common. BMW doesn't bring their lower end stuff into the US. Toyota created Lexus to be a luxury brand.
Or there's the pricier sorts of bottled water...
If you can get yourself into a "value through market position" opportunity early on, it seems like a license to print money.
"It's a limited-time opportunity to create an inconceivably rare sneaker. Each month, Nike is releasing a new, exclusive material option for the Nike Air Force 1 High Premium iD. A limited number of pairs is available to customize each month, so get one while you can."
I'd say that $200 is approximately the right markup compared to the regular price of an Air Force considering what's required for individual customization. I do note that the price of a shoe may be high to begin with.
That being said, they've stepped it up beyond your example and gone with "Bespoke" options for their shoes. $800 a pair.
Tell me about it. On my honeymoon in Maui I accidentally spent $9 on a bottle of water at Ferraro's.
I've used Android phones and while they are fine enough, the UI feels a little 'off' and the responsiveness is lower. It's enough to make a real, subjective difference.
I like to think that I got an iPhone after carefully considering all the alternatives and making an informed technical analysis because I am a unique individual and I would never follow the herd or copy other peoples' actions. (At least that's what I tell myself.)
You might want to think different (sic) about that for a moment, given that there are hundreds of millions of iOS devices out there in use right now.
Virtually everyone who can afford an iPhone either has one already, or has at least tried one out a bit.
Maybe 25% market penetration? Not small potatoes, but still, Most people haven't bought one.
Not sure how old you are, but I have also noticed this trend in Gen Y (friends like myself) starting to get colored gemstones. Of course this is totally anecdotal but maybe De Beers stranglehold is finally going away?
Congratulations as well by the way.
BTW you will have little to no say in the process. Just go with whatever she requests it will make your life easier.
They stayed open past their normal hours so that my girlfriend and I could make it down. They sourced 3 purple sapphires for us so she could see, and 1 of which was absolutely gorgeous. My girlfriend loved it, and it's what I ended up going with. Putting a payment down next week.
But the best part appeals to the nerd and engineer in me. They do bespoke rings, fully in-house. They will customize the ring to any design you want, to fit your finger and the gem. That way, it's not only designed the way you want, it's made to uniquely fit you.
They design everything in CAD, and iterate with you via e-mail. Then they print it on their 3D printer, where you have a chance to go in, see it in person on your finger and with the gem. If changes are needed, they can iterate again. Otherwise, they go ahead and make a plaster mold. Then they melt the metal (i.e. gold, platinum) and cast it. They have all the equipment for this in-house in the back of their store. Honestly, I haven't been more excited about buying a ring than now. I'm super happy I found them.
Does she still want the diamond after being shown the article? Most people don't like being manipulated.
We went out for coffee after shopping. She knows I'm right about diamonds. Her issue is a) she has difficulty listening to me about these things because she's stubborn and feels like I'm manipulating her b) she doesn't want to buck the trend, be different, and have to explain things to her friends and family.
She hates being different, and she hates being the centre of attention. She feels that by not getting a diamond engagement ring, others will speak ill of her behind her back, and she doesn't want to stand out like that.
I'm the opposite. I could care less what others think. I don't love being the centre of attention, but I don't mind it. I hate being conformant though.
Anyway, it's not criticism of her. I love her dearly, I just need her to see the light.
It kind of sounds like criticism of her. And it reads like you love her conditionally.
And you "need her to see the light", is that true? What happens if she doesn't come around to your point of view?
I think she'd be pleasantly surprised to hear how much of a non-issue it has been among friends, family, and acquiantances that me and my (also female) fiancee don't wear any engagement ring at all (our ruby and sapphire rings are both waiting to be resized).
That said, the point of a gift is to give something the recipient would enjoy -- not something you would want yourself. So, if it really makes a difference to her or her family, I'd recommend getting a diamond, even if it sets back your plans for a house, etc (I hope she understands that!!)
My wife was appalled when I told her I refused to buy her a diamond engagement ring. "Why wouldn't you want to give me a diamond ring? I couldn't marry someone who wouldn't give me a diamond ring."
We're married now and she doesn't even wear the sapphire ring that I bought for her because of chores, etc. Sure, she had to explain to almost everyone why it wasn't a diamond ring but that just means that she had one more topic to go through with her friends.
However, I have to take my girlfriend's feelings into account. I have to buy the ring, but she's the one that has to wear it. If she has ill-feelings towards the ring when she wears it, she'll hate it. I'm not saying that's what'll happen, I'm just saying I need to take her wants and needs into account. Simply making a decision for her because "I know what's best." is selfish.
Anyway, I'm slowly whittling her down. She just told me she may be interested in a sapphire ring.
Furthermore - there's a saying that "believe in it long enough - and you'll think it's true". So you have to be careful with that - sometimes appearances become deceiving (what you show becomes what you are).
The positive sum that the wager demonstrates in a belief in a God is nullified when you divide by the number of Gods/religions/deities in existence (many thousands/millions). Indeed - if you factor exclusive Gods/religions/deities that condemn separate beliefs - the wager goes negative since holding many beliefs that negate each other, with the addition of trying to believe them all, will cost you much more than just not doing so.
This assumes pure "afterlife" expected probabilistic value - I'm ignoring societal pressures which would eliminate this problem of many Gods/afterlife and replace it with "Believe in what we do - or die!". Then it's not Pascal's wager any more - it's believe or die because others force you to.
Why do you trust sense-data to be real? Brains in vats, holosuites, yada-yada ...
By that definition reality is completely subjective which rather plays towards my point.
You find the axiomatic basis of scientific understanding to not belong to "practical knowledge". Or that the axiomatic nature of standard logics is not practical? So basically all of physical science, mathematics, logic, ... understanding the epistemological basis of these things is impractical? Because? On such a position theoretical physics would seem to be 'impractical' and not something to concern ourselves [humankind] with - the advances in theoretical physics in the last century or so have worked themselves in to almost all areas of modern 'Western' life.
And we do agree that reality is subjective; it's just that if a facet of reality is only perceived by a small fraction of the population, its value is insignificant to most. The value of reality is in its adoption as a foundation for communication.
Simple example that many people use day-to-day is relativity and GPS (eg http://www.astronomy.ohio-state.edu/~pogge/Ast162/Unit5/gps.... <- that's just the first likely looking Google result for GPS+relativity, feel free to look for yourself).
I guess things like transistors, fibre optics, nuclear power, and lasers are so far removed from everyday life that theoretical physics simply has no application to reality. /sarcasm
1)Product is monopolistic, with supply artificially constrained in order to generate prices that reflect that. Actual value of say, a one carat diamond, is probably a few hundred bucks max.
2)Cultural demand was artificially crafted by a sustained (admittedly brilliant) marketing campaign by the monopolistic entity years ago. It is now ingrained into the core of our culture. Annoying to think that it didn't exist at the beginning of the previous century and that its arrival was not organic.
3)I cannot realistically educate myself on the product in any meaningful sense like I can with a TV or a car. Yes, I visited many jewelers. They all were quite happy to educate me on how diamonds are graded. I read up on my 'Four C's". I peered into the jewelers lens and nodded as I saw the slight imperfections of one stone vs another. But you know what? At the end of the day, there is NO WAY I could accurately grade them, even after all of my research and hands on 'training'. Is that diamond a VS3 or WS1? No idea, but one is far more expensive even though they look the same under the scope. It would probably take me years to be able to identify why.
4)Blood diamonds. People are being enslaved, murdered, and abused in order get these stones to me. Not to mention other horrible labor abuses, and the guns that those diamonds go to fund that wreak havoc in the origin communities. Honestly, there is no way to tell a stone's history, especially when you are dealing with a cartel. You can't exactly ask for proof, and anything they tell/show you...can you really trust the authenticity?
So. Anyway. Yeah. I mitigated the 4th point by buying a lab grown diamond. (Not much cheaper than mined diamonds btw if you are wondering).
Don't get me wrong, -I was happy to give my fiance something that made her so happy. One of the hilarious premises we all learned when we took our first Econ class was that in order to make those simple models work, we assumed consumers were rational. We all know how true this isn't. This purchase exemplifies that for me. I'm acutely aware of how irrational I personally find it, while being simultaneously aware that I have no problem setting that aside in this (somewhat rare for me) instance. I am infinitely more rational with purchases I make for myself than for those I love. That last sentence is where a lot of margin lies for a LOT of products.
And with about 15 minutes of reading you'd know there's no WS1. Or VS3. At least not according to the GIA scale, which is the most common in Northern America. VS3 is a marketing term to make an SI1 sound better. I'd assume WS1 is really VVS1 - and I guarantee you'll be able to spot the difference between a VVS1 and an SI1.
(Sorry, I happen to live with somebody who's a certified gemologist. I assume I have been affected by gem nerdery via Osmosis ;)
I did far, far, far more than 15 minutes of reading. I think this just underscores my point ;)
While I was able to easily identify higher quality stones compared to others under the lens, I was wholly unable to rate them other than comparatively to each other. Unfortunately for consumers of these products, we don't have access to 6 months of time and a slew of 'practice diamonds' to check out.
I wonder what the variance in ratings for a typical gem is if you were to have it independently appraised many times over?
But even if it didn't: Yes, doing some things requires specific training. The same is true for any kind of appraisal system. You won't be able to judge antiques with 15 minutes training, either. Or paintings. Or even something as common as cars.
As for the rating, diamonds are usually rated comparatively, so you had the right approach. If you're a professional diamond grader, you often have a set of reference diamonds. (Yes, that's kind of hard to come by. But diamond grading is hardly the only job that requires specific tools)
The variance should be very low. Part of the certification process from GIA is that you grade a bunch of stones, and you better get it right, or no cert for you. Yes, you can occasionally squabble over a stone that's right on the borderline between two grades.
Irrational would be paying more money for a smaller diamond.
Responding to social norms creating by a marketing campaign is many things - strange, definitely - but it's not irrational.
If a person is content to get something "what everyone gets", they are good to be defrauded while supporting labor violations in some third word country.
Accepting "what everyone gets" is a real no-go, it's a surefire way to measure a person up. "Too light".
Me and my wife, we got outselves a pair of titanium rings for the wedding. They look downright alien, everybody asks about them on sight. But all those opportinities are lost to you once you accept "what everyone gets"
I give major props to my now wife being OK with the gold engagement ring I bought out of principle. It had a fanciful cheesy design too. :)
Here's a related one from yesterday:
“What behavioral psychology reveals about your online photos: Comments and approval from other users end up being more important than the way you look.”
It's the same phenomenon both times -- social proof. It's the same reason you're more attractive in a club if you appear to be getting approval from other attractive people. The same reason the original PageRank algorithm did a good job of surfacing web pages people wanted to see.
This article was actually already posted somewhere in the comments a couple of days ago: http://news.ycombinator.com/item?id=4523063
Incidentally, rather than pitch it as "the ones you buy are created in a lab and are cheap," I'd go for something more along the lines of "they grow them through a natural process, kinda like pearls." It's not scientific, but it's true enough.
What made De Beers and the diamond industry was with cartels and marketing. I think devs inherently lack both those features being independent thinkers and gasp introverted. Let's change that.
Developers lack the "feature" of cartels?
This comment makes no sense and appears to me to be a poorly concealed attempt to wedge an unnecessary argument into this discussion.
The second is "Polar Diamonds" from Canada. They are the only source of natural
diamonds that I know about that isn't controlled by the cartel.
It's not rational, and these stones might be nicer, but they're not diamonds. Branding, there.
2) Make it clear that your objection is not to financial. If you do go with a gem that proves to be less expensive, donate the balance to a cause she believes in. If you do have financial objections, express them separately, in financial terms; don't conflate the issues.
3) Point out that it is not a long-standing tradition, but rather a recently manufactured one.
4) Don't skimp on other traditions.
(Pedantically, I could claim we are all feminists, after all, nearly everyone here thinks women should be able to vote. But that wasn't the meaning I had in mind initally)
Maybe there is hope after all! (not)
I am not sure that the people of Botswana would agree.
Second: a major prediction made in this article did come to pass, but it didn't have the predicted effect on diamond pricing. A serious contender to De Beers emerged in the early 2000s in the form of a multinational, "breakaway" cartel. Yet, both cartels -- and all other minor, independent players in the market -- seem to be acting in concert to keep supplies artificially low, and prices artificially high. In fact, the rate of price increase is at its highest in modern history. Economics tells us that this shouldn't be the case, especially given the emergence of new market entrants. And yet, the rate of price increase took off at precisely the same moment as the entrance of the new competitors. (Source: http://www.ajediam.com/investing_diamonds_investment.html)
What could be causing a major, year-over-year price increase in the face of new competition? Well, one guess would be that the two cartels are colluding in some way. Perhaps they've made an arrangement to fix prices or production. Or perhaps they've carved up the map, and reached some sort of non-competition agreement in each other's territories. Perhaps both. Ordinarily I'd call these ideas paranoid. But the history of the diamond business tells me that we can't put it past these guys.
Just a couple weeks ago I was at lunch with my Japanese coworkers and the conversation topic went to one of them thinking on whether to buy a diamond ring to his wife as an anniversary gift.
I told him to better stay away from diamonds, and mentioned the diamond situation (pretty much the contents of the article) and not only not any of them had ever heard about it (despite most of them having graduated from top public and private Japanese universities), but also I ended up getting from all of them the most incredulous and distrustful looks I had ever been given in all my years in Japan.
A fundamentalist vegan urging them to immediately abandon sushi and seek redemption in the purity of soy beans would had been more warmly welcomed to discussion than my comment.
Any society is full of irrational practices and purchases. Throwing rice at a wedding? What's that about? $5 cards to wish someone well? What on earth? Yet these are all accepted by society as societal norms, and even when the companies have conspired to create them (or at least magnify their importance) it is what it is. In a form of social proof, nobody wants to be the first to break with the tradition, which is how most tradition stays. Same goes for Christmas - which is nominally a Christian religious festival, but, at least in the USA, widely adopted by people of all religious and aetheist beliefs. Because nobody wants to be the grouch who doesn't hand out presents.
Interestingly the article mentions the introduction of Argyle diamonds - a friend of mine, while travelling in remote WA bought a large diamond at a fraction of the retail cost, direct from either the mine itself or a local retailer. He kept this for 15 years, which was the time period between purchase and eventually finding someone to marry (and getting it put into a ring).
But as to why the introduction of new sources hasn't drastically affected prices, I think that any new cartel or operator entering the market is just as likely to free-ride the hard work of De Beers. If De Beers spends significant money and influence maintaining a monopoly, and therefore creating monopoly pricing, any new entrant rationally would be well served to restrict supply so that they can free-ride on the monopoly prices without any of the costs of maintaining the monopoly.
Perhaps, but it's extremely hard (and not very lucrative) to follow the leader when the leader exercises such dramatic buyer and seller power in a marketplace -- unless you plan to compete on price, or to compete by tapping an entirely different market segment. Perhaps prices are much lower in certain markets, but if that were the case, we probably would have heard about the arbitrage opportunities by now, and commodities traders would have closed that gap in a heartbeat.
The different-segment theory is interesting, but it seems very hard to fathom without some sort of non-compete arrangement in place -- be it in X or Y geography, or for Z consumer segment, etc.
My best guess is that this is a two-sided story. There's a major demand factor involved (perhaps in Asia), coupled with the likelihood that the two cartels aren't directly competing. B has to go along with A if there's a price increase, because we know that the supply isn't actually low. There are enough diamonds to keep up with surging demand.
I think Game Theory is the right way to look at this - who really gains from a drop in prices? Sure, the new consumer wins - but at the cost of destroying a societal norm. The new entrant might gain short-term profits but at the expense of their long term market and possibly their very existence.
The opportunities for diamond arbitrage are very small, both because there aren't large organised exchanges (no diamond futures contract I'm aware of) and because the retail market is controlled by the suppliers, removing the possibility of 'black market' arbitrage.
Many, many companies would love to exert control over their market in the same way. I just think that new entrants want a piece of the monopoly pie rather than disrupting the entire industry.
In such a scenario, De Beers wouldn't necessarily or aggressively chase the second player into the new market. It's doing just fine in its existing markets, and it doesn't want to risk setting off a price war over the new market.
I have to think that the idea of free/natural markets has to be one of the greatest tricks ever pulled by anyone at any time (next to communism). Markets are artificial and restrictive for a reason - they're created by governments for the benefit of the populace - they are probably the most unnatural constructions ever created in human history (next to the corporation/government).
It is in the interests of market participants to maximise profits (to survive/grow). Efficient markets are the enemy of profits. Hence, market participants will make markets less efficient as a function of their incentives - if they can. It may seem more efficient in the short term - i.e. price wars - but in the long term - after the field is cleared - prices always rise in some form or another.
Free/natural markets are probably one of the greatest lies ever sold.
Can you give any example?
> Free/natural markets are probably one of the greatest lies ever sold.
What do you mean? Free markets are not a lie. There are tons of free markets. If I buy bread at the supermarket, I can choose among multiple brands.
Bread is an example of a cartel structure reinforced with marketing, economies of scale (monopoly) and previous consumer buy in. You can choose from multiple brands - but you'll notice the price of bread isn't falling very quickly - it's an implicit pricing pact - you can undercut your competitors - but not for long, and definitely not forever.
Now, they might do things like sign contracts between each other to prevent defection, or buy each other's stock to make defection less profitable than profitable than playing along, but then you have to worry about disruption from outside the cartel. Or you could forcibly cartelize industries like FDR tried to do with the National Recovery Administration if the government really wants an industry to be profitable when it wouldn't otherwise be.
And when I think of successful cartels in history I think of DeBeers and OPEC and... well, those are the only two I could name that lasted longer than a few years.
Another would be drug cartels. They keep prices artificially high so that everyone gets a share of the profits. But cartels in general always have players that "cheat" by independently lowering/raising the price. If a player is caught cheating, the cartel usually punishes the rogue player by excluding them from future pricing meetings and use their market share to kill the player both figuratively and literally when drugs are involved.
[I'm not trying to give the guy any credit or praise for his actions, though.]
This might be true, but short term profits are still attractive to people who want to disrupt the industry. If I discovered a significant diamond mine in my backyard, I'd undercut the inflated prices of the current cartel before attracting attention from the big boys.  The only way to disrupt the diamond market is to invent a replacement product that is accepted by all females/males that want diamonds.
every single startup on HN that is "disruptive" and pining to be acquired
"You either die a hero or live long enough to see yourself become the villain."
Is it really? Or are you assuming that because you and your friends know about it that you think that everyone knows about it? (not an attack, just a easy trap to fall into).
players in the market -- seem to be acting in concert
I think that whenever a new participant enters the market they find that the most profitable path is to collude with the existing cartels. After all, if diamonds are really worth nothing, why would you enter the market unless you planned to keep the status quo?
What could be causing a major, year-over-year price increase in the face of new competition
I seem to remember reading somewhere that the growing affluence of Asian markets was increasing demand. But that might be the marketing spin.
edit: added everything under "or are you assuming" sentence.
We could split hairs for awhile and debate about how well known it is, or whether "Joe Sixpack" in Des Moines knows about it. But it's far from obscure.
I'll grant you that a lot of the major demand drivers (young couples, new money, etc.) probably don't know, or at least don't care. And that might make all the difference.
EDIT: Seems we both edited our posts at the same time. I think the Asian theory is interesting, and it might be the most savory / least fishy driver of price increases. Perhaps the "Joe Sixpack" of Shanghai, newly monied and with very few reasonable investment options in his home country, is buying diamonds left and right. Wouldn't surprise me. Either way, it seems odd that the cartels wouldn't go head to head in Asia for the big prize here, unless they reached a gentleman's agreement on territories.
An edit-off at 10 paces. Draw!
I think the whole thing is fascinating. From a marketing perspective it's amazing how De Beers manufactured demand for diamonds out of near nothingness.
it seems odd that the cartels wouldn't go head to head
This is an example of mutually assured destruction at play. The big players can't go head-to-head selling what is essentially a commodity good, without price cutting which would eventually lead to diamonds being sold for their true value. None of the players are interested in that.
Also, DeBeers has diamonds and cash enough to sell below your cost of pulling things out of the ground for a lot longer than you can stay solvent.
Niggler posted a comment to this Atlantic article (http://news.ycombinator.com/item?id=4523063) and then submitted it as a new post that didn't get traction because I am guessing of his new status (green name text) in the HN community.
Olalonde (http://news.ycombinator.com/submitted?id=olalonde) who is an old hat commented on the article, but didn't get that many up votes or reply's (http://news.ycombinator.com/item?id=4525901), but submitted the Atlantic article (http://news.ycombinator.com/item?id=4535611) that Niggler found and brought to the HN community.
Now this great article from 1982 is on the front page of HN.
My father once gave me a gift which his father gave it to him. Which is basically a wrist watch that automatically winds a spring inside while a person is walking. That watch is practically useless by today's standards. But that is totally besides the point. He gave it to me because that has some 'emotional value' and the fact that it was expensive at that time, and his father went through a lot of work to buy him that has some sentimental value attached to it. That is the whole reason behind its existence, He gave it to me because it means something to him. Many of my friends have asked me if I want to sell it, but I've turned them down. It looks awesome and is a jewel.
My mom also wears a diamond, and she has told me once she passes away that is supposed to given to me and never to be sold to anybody else. No, De Beers didn't whisper in her ears not to sell it. Its just my dad gave it to her and that diamond reminds her of her days when she was young, and the moment when it was given. That thing reminds her of those days. She just doesn't want some other women to wear it.
You can argue these things in the investment per se. But you don't give the diamond to your girl and that moment is gone forever. You can earn that money back again, but you can't earn that moment back. She won't have that diamond with her which she can remember you gave it to her.
As nerds we can argue about rationality, but what is that worth to human sentiments?
Besides you can expand this argument to everything around. And the only way to live will be to live frugal.
As for remembering a moment, I don't see why something expensive is required. You could as well collect a special looking pebble from the beach and have it remind you of the romantic sunset you watched together.
(sort of an evolutionary biology / Ayn Rand-ian concept, of course, but I see this kind of reverence for 'the best' coming from some people)
Not to say that 'normal' people don't ever do such things, but they are often confined to desperate situations (war zones, disaster zones, economic depression, etc).
No one's arguing about the idea of giving a gift or a token or your love. The issue is about why this token needs to be a diamond.
I know that in our family, and my girlfriend's, there is a lot of jewellery that is passed down between generations. This is usually gold though, which at least has some value associated with it. It's not like we consider melting any of it down or selling it. But it's nice to have real value associated with generational possessions on top of their sentimental value.
Try gifting her a piece of coal and watch.
Really why should you wear a suit? Or why should you wear a watch? Or why should you dine a good restaurant?
There are a few emotions attached to a few things. Like for example Roses.
Many people are questioning the first two. :)
"good restaurant" is not quite precise: if you meant "popular", "chic", people are questioning that too. If you meant "has tasty food", then the analogy doesn't hold.
Your roses example is a good one though.
That's the whole point. Coal is a hyperbole here, but her special attitude towards diamonds is something manufactured artificially around 50-60 years ago.
"By the mid-1980s, the avalanche of Australian diamonds will be pouring onto the market. Unless the resourceful managers of De Beers can find a way to gain control of the various sources of diamonds that will soon crowd the market, these sources may bring about the final collapse of world diamond prices. If they do, the diamond invention will disintegrate and be remembered only as a historical curiosity, as brilliant in its way as the glittering little stones it once made so valuable."
As the diamond market hasn't collapsed 30 years on, De Beers must still be doing something right.
Australian gem quality output was never going to seriously disrupt De Beers, just challenge them a bit. That was known at the time, and I'm slightly perplexed why The Atlantic's article says what is does.
There are certainly moral problems with how they built their empire, but why are clever marketing and aggressive pricing bad things? The former is simply how you tell people about new products. Remember diamonds went from being owned by almost no one to being owned by lots of people. If those rings make them happy, then why is it our business?
How is DeBeers marketing any different from Apple marketing?
Of course, the article does do a good job in warning people that their diamonds may have little resale value. But that's a risk most buyers are willing to take. After all, most non-divorced people don't sell their wedding and engagement rings.
Further, DeBeers must face the same competition that Apple faces. In these comments, we see lots of people looking at other gemstones (sapphires, etc) in place of diamonds. The other gemstone producers compete with DeBeers in the same way that other smartphone producers compete with Apple.
I'm not sure it's helpful to reason from the fact that something is illegal to why it is wrong. Sort of like the joke about the three storekeepers in jail: The first charged higher prices than everyone else and was convicted of price gouging. The second charged lower prices than everyone else and was convicted of dumping and cutthroat competition. The third charged the same prices as everyone else and was convicted of collusion. Laws will be made against all kinds of things, and there are many incentives (e.g. law firms revenue) to make laws against very profitable enterprises.
7 REASONS WHY DIAMONDS ARE A WASTE OF YOUR MONEY
I've been in the diamond business for over 10 years. I've traveled all over the world buying and selling diamonds. I've passed through most of the major airports across the United States with about a million dollars worth of diamonds in a leather wallet stuffed inside my pants. I've bought and sold diamonds in Dubai, Mumbai, Moscow, Hong Kong, Paris, Stockholm, Tel Aviv, Madrid and Barcelona. Even today I am involved on the fringe of the diamond business, running a diamond education site helping would-be buyers.
Considering my deep personal involvement in the diamond business, my opinion might surprise you -- diamonds are a terrible waste of your money.
Even if this article doesn't convince your female friends, it'll spread some awareness and cause more people to view diamond engagement rings with a bit of doubt.
When I shared it on Facebook, I got likes from only male friends and arguments from a female friend. This was slightly unusual because such topics normally get a few likes from female friends. I guess there's a serious uncertainty among my friends about throwing away the valuing of diamonds that's been strongly ensconced in the minds of wider society.
Fundamentally, a large part of the worth of diamonds comes from their cost and the sacrifice they represent. This in turn is a conspicuous signaller of value, when women show their diamonds to friends ("look how much he loves me"). So any alternative to diamond rings has to show a similar level of value/worth. We have to try to beat diamond marketers at their own game - with equally powerful anti-marketing.
I'd advocate an approach of laying the groundwork early by sharing such articles regularly, and when actually in a relationship, offering a display of value that she appreciates (e.g. memorable trip to Europe, endowment to a cause of her choice, a custom-designed gemstone) in tandem with asking her to consider other gemstones, perhaps one in her favorite color. If the ground's been softened by our combined anti-marketing campaign, she might be willing to select and customize a stone that she genuinely finds beautiful and accept your specially planned trip (maybe extend it to Asia too, to up the friends'-envy quotient).
Or at least I hope as much.
Translation: Please, please, please don't resell it. You'll screw up our cartel.
My advice, take her on a trip to Paris and Versailles instead... or climb Mount Everest if you're more adventurous. We have great memories.
The Oppenheimers have sold their entire stake in DeBeers - they've cashed out. They went from producing 80% of the global market (in the 90's) to 35%; clearly, the writing is on the wall, and without strong centralized vertical management, the diamond market will collapse.
Time to short diamonds.
To profit they basically have to ape De Beers and create a huge demand in Europe or Asia (I think diamond engagement rings are that big only in the USA)
Still they are expensive and luxur-ish. I guess Russian jewelers are just riding the world-wide hype wave, not interested in disrupting or "harming" the market.
The only downside is that it's not as tough as diamond, so you have to take some care not to damage it, although this can be mitigated by the way it's mounted in the ring.
Like someone pointed out, it is not an investment. It is a demonstration for your future marriage. She wants to see how much she's worth to you.
Buy the ring. If you indeed have moral issues, buy the conflict free one.
"Russia reveals secret diamond field containing 'trillions of carats'" http://news.ycombinator.com/item?id=4534468
Ha, they quickly stuck a date in the title. ;)
I was going to comment this is a "pre-internet" story.
The film Blood Diamond came to mind as I was reading this, and the "Diamond District" in New York City. Lots going on behind the scenes in the "diamond industry".
This is a superb lesson in 1. artificial scarcity and 2. how consumers can be conditioned to accept new symbols (a diamond is just a rock; but what does a diamond "mean"?).
Both are principles that, for better or worse, apply to how business is done on the web.
"I would hurt poor people for you."
The euphemism "Estate jewelry" instead of "secondhand" or "used" seems to be preferred.
Then about 1/3 of the way through I started thinking "what the hell, no article can be this long", then I looked at the date.
A great read though, it does a lot to remind us how articles used to be back in the day before our current attention spans.
Where can I find 100's more like this, _on the web_?
Slate aggregates and curates some of these:
"Mother Earth Mother Board" by Neal Stephenson. Wired.
It's about FLAG - Fibre Optic Link Around the Globe. 40k+ words.