Better a diamond with a flaw than a pebble without one. - Confucius
There's no denying that diamonds are a traditional symbol of romance
and love. Why, a man needs a diamond ring to ask the woman of his dream
to marry him, right? But was it always that way? Did you know that someone
worked very, very hard to make diamond rings de rigueur in marriage
proposals? Or that diamonds aren't actually very rare at all? Or that
they make lousy investments?
Photo: Fotografiert von Mario Sarto
Here 10 Facts About Diamonds You Should Know:
1. The Earliest Use of Diamonds: Polishing AxesIf you ask a hundred people what they think of first when they hear the word "diamond," I bet you get 99 who say a diamond engagement ring. Truth is, the majority of diamonds mined today are used for industrial purposes - and that may also be the very first use of diamonds by humans. Harvard physicist Peter Lu and colleagues found that ancient Chinese used diamonds to polish ceremonial burial axes in the late stone age or over 4,500 years ago. The axes, which are made from corundum (or ruby in its red form and sapphire in other colors), were polished to a mirror finish. Corundum is the second hardest naturally occurring substance on Earth and close examination of these axes revealed that they could've been made only with diamond abrasives. (Source) It's quite fitting since today, 80% of mined diamonds (about 100 million carats) are used for the industrial purposes of cutting, drilling, grinding, and polishing.
2. Diamonds Are Not The Hardest Substance on Earth"Diamonds are the hardest substance on Earth" is practically a mantra for jewelers trying to impress you with its physical properties if you're not swayed by its beauty. Too bad it's not true: while diamonds are the hardest natural mineral substance, it is not the hardest substance known to man. In 2005, physicists Natalia Dubrovinskaia and colleagues compressed carbon fullerene molecules and heating them at the same time to create a series of interconnected rods called Aggregated Diamond Nanorods (ADNRs or "hyperdiamond"). It's about 11% harder than a diamond. (Photo: ESRF)
3. De Beers: The Diamond CartelWe can't talk about diamonds without talking about De Beers, the company that single-handedly made the diamond industry what it is today. De Beers was founded by Cecil Rhodes, who also founded the state of Rhodesia which later became Zambia and Zimbabwe. The Rhodes Scholarship is also named after him, and funded by his estate. Rhodes started by renting water pumps to miners during a diamond rush in 1867 at Kimberley, South Africa. He expanded into mines and about twenty years later became the sole owner of all diamond mining operations in the country. Rhodes built De Beers into a diamond cartel (well, they prefer "single-channel marketing" and since they're one company, they're technically a monopoly). De Beers mines diamonds, then handle their sales and distribution through various entities (in London, it's known as the innocuously named Diamond Trading Company; in Israel, it's simply called "the syndicate"; in Belgium, it's called the CSO or Central Selling Organization.) If you want to buy diamonds from De Beers, you've got to play by their rules: diamond are sold in events known as "sights." There are 10 sights held each year, and to buy, you have to be a sightholder (these are usually diamond dealers whose business is to have the stones cut and polished and then resold at diamond clearing centers of Antwerp, New York, and Tel Aviv). The diamonds are sold on a take-it-or-leave-it basis. A sightholder is given a small box of uncut diamonds priced between $1 and $25 million. De Beers set the price - there is no haggling and no re-selling of diamonds in uncut form. It is rare for sightholders to refuse a diamond package offered to them, for fear of not being invited back. And those who dare to purchase diamonds from other sources than De Beers will have their sightholder privilege revoked. In the early days, De Beers controlled about 90% of the world's diamond supply. Today, its monopoly on diamonds has been significantly reduced. It is estimated that the cartel now controls about 60 to 75% of the world's diamond trade (source)
4. So Why The Name 'De Beers'?De Beers was actually named for the brothers Johannel Nicholas de Beer and Diederik Arnoldus de Beer, whose farm Cecil Rhodes bought when diamond mines were discovered on it.
5. Are Diamonds Rare?Diamonds are actually quite rare in the past but not any more. While it's true that the process of extracting diamond is quite laborious (mines move many tons of dirt per carat of diamond found) and that gem-quality diamonds are relatively few (only about 1 in 1 million diamonds are quality one carat stones, only 1 in 5 million are 2-carat; and 1 in 15 million are 3-carat), diamonds are not rare in an economic sense because supply exceeds demand. (Photo: mafic [Flickr]) To maintain the high prices of diamonds, De Beers creates an artificial scarcity: they stockpile mined diamonds and sell them in small amounts. Perhaps De Beers chairman Nicky Oppenheimer said it best: "diamonds are intrinsically worthless, except for the deep psychological need they fill." (mental_floss, vol 7 issue 6, p. 21 "Diamond Engagement Rings" by Rebecca Zerzan)
6. Moon-Sized DiamondSo - diamonds aren't rare on Earth, and it may not be rare in space either. In 2004, astronomer Travis Metcalfe of the Harvard-Smithsonian Center for Astrophysics and colleagues discovered a diamond star that is 10 billion trillion trillion carats!
The cosmic diamond is a chunk of crystallised carbon, 4,000 km across, some 50 light-years from the Earth in the constellation Centaurus. It's the compressed heart of an old star that was once bright like our Sun but has since faded and shrunk. Astronomers have decided to call the star "Lucy" after the Beatles song, Lucy in the Sky with Diamonds. (Source)According to scientists, if you wait long enough, our own sun will eventually turn into one such large diamond star!
7. Famous DiamondsJust because they're not rare, it doesn't mean that there aren't exceptional diamonds. There's the 45-carat Hope Diamond (and its famous Curse), the mystical Koh-I-Noor Diamond, and the largest diamond ever found, the 546 carat Golden Jubilee. But this is Neatorama, so here's a truly fascinating story about the Bokassa Diamond. In 1977, a crazy Central African dictator named Jean-Bédel Bokassa declared himself an emperor and asked Albert Jolis, the president of a diamond mining operation, for a diamond ring (he made sure Jolis knew that nothing smaller than a golf ball-sized rock would do!) Jolis didn't have the money to buy such a large stone but if he didn't deliver one, his company would lose the mining concession in Central Africa. So he devised a clever ruse: Jolis found a large piece of black diamond bort (a poorly crystallized diamond usually fit only to be crushed into abrasive powder) that curiously resembled Africa in shape. He ordered the diamond polished and mounted on a large ring. A one-quarter carat white diamond was then set roughly where the country is located on the continent. Jolis presented the "unique" diamond to Bokassa, and the clueless emperor loved it! He thought that the $500 ring was worth over $500,000! Just two years later, when Bokassa was overthrown in a coup, Jolis heard that he went into exile with his prize diamond ring, and noted wryly: "It's a priceless diamond as long as he doesn't try to sell it." (Source)
8. The Most Brilliant Advertising Campaign of All Time: A Diamond Is ForeverThe 1930s was a bad decade for the diamond industry: the price of diamond had declined worldwide. Europe was in the verge of another war and the idea of a diamond engagement ring didn't take hold. Indeed, engagement rings were considered a luxury and when given, they rarely contained diamonds. In 1938, De Beers engaged N.W. Ayer & Son, the first advertising agency in the United States, to change the image of diamonds in America. The ad agency suggested a clever ad campaign to link diamonds to romance in the public's mind. To do this, they placed diamonds in the fingers of Hollywood stars and suggested stories to newspapers on how diamond rings symbolized romance. Even high school students were targeted:
N. W. Ayer outlined a subtle program that included arranging for lecturers to visit high schools across the country. "All of these lectures revolve around the diamond engagement ring, and are reaching thousands of girls in their assemblies, classes and informal meetings in our leading educational institutions," the agency explained in a memorandum to De Beers. The agency had organized, in 1946, a weekly service called "Hollywood Personalities," which provided 125 leading newspapers with descriptions of the diamonds worn by movie stars. [...] The idea was to create prestigious "role models" for the poorer middle-class wage-earners. The advertising agency explained, in its 1948 strategy paper, "We spread the word of diamonds worn by stars of screen and stage, by wives and daughters of political leaders, by any woman who can make the grocer's wife and the mechanic's sweetheart say 'I wish I had what she has.'" (Source)In 1948, an N.W. Ayer copywriter named Frances Gerety, had a flash of inspiration and came up with the slogan "A Diamond is Forever." It's a fitting slogan, because it reminds people that it is a memorial to love, and as such, must stay forever in the family, never to be sold (see below). Ironically, Gerety never married and died a spinster. (Source) But equating diamonds with romance wasn't enough. Toward the end of the 1950s, N.W. Ayer found that the Americans were ready for the next logical step, making a diamond ring a necessary element in betrothal:
"Since 1939 an entirely new generation of young people has grown to marriageable age," it said. "To this new generation a diamond ring is considered a necessity to engagements by virtually everyone." The message had been so successfully impressed on the minds of this generation that those who could not afford to buy a diamond at the time of their marriage would "defer the purchase" rather than forgo it. (Source)Then the clever ad agency went one step further. N.W. Ayers noted that when women were involved in the selection of the engagement ring, they tended to pick cheaper rings. So De Beers encouraged the "surprise" engagement, with men picking the diamond on their own (with the clear message that the more expensive the stone, the better he'll look in the eyes of a woman). They even gave clueless men a guideline: American men should spend two months wages, whereas Japanese men should spend three. Why? Because they can:
But the guidelines differed by nation. A "two months' salary" equivalent was touted in the United States, whereas men in Great Britain got off the hook with only one month. Japan's expectation was set the highest, at three months. I asked a De Beers representative why the Japanese were told to spend so much compared to the Americans or the English. "We were, quite frankly, trying to bid them up," he answered. (Source: The Heartless Stone: A Journey Through the World of Diamonds, Deceit, and Desire by Tom Zoellner)In 1939, when De Beers engaged N.W. Ayer to change the way the American public view diamonds, its annual sales of the gem was $23 million. By 1979, the ad agency had helped De Beers expand its sales to more than $2.1 billion (Source).
9. Diamonds are Actually Lousy InvestmentsDe Beers is quite famous for never lowering the price of diamonds. During the Great Depression, the cartel drastically cut supplies and stockpiled diamonds to prop up their price. But do diamonds make good investments? Unless you're a certified diamond seller, the answer is no: you won't be able to sell a diamond ring for more than what you pay for it. And the reason is simple: with diamonds, you buy at retail and sell at wholesale, if you can sell it at all. In 1982, Edward Jay Epstein wrote an intriguing article for The Atlantic, titled "Have You Ever Tried to Sell a Diamond?" In it, he wrote about an experiment to determine a diamond's value as an investment.
The [Money Which?] magazine conducted another experiment to determine the extent to which larger diamonds appreciate in value over a one-year period. In 1970, it bought a 1.42 carat diamond for £745. In 1971, the highest offer it received for the same gem was £568. Rather than sell it at such an enormous loss, Watts decided to extend the experiment until 1974, when he again made the round of the jewelers in Hatton Garden to have it appraised. During this tour of the diamond district, Watts found that the diamond had mysteriously shrunk in weight to 1.04 carats. One of the jewelers had apparently switched diamonds during the appraisal. In that same year, Watts, undaunted, bought another diamond, this one 1.4 carats, from a reputable London dealer. He paid £2,595. A week later, he decided to sell it. The maximum offer he received was £1,000.Why is there no active after-market for diamonds? It is estimated that the public holds about 500 million carats of gem diamonds - if a significant portion of the public begins selling, then the price of diamond would plummet. To prevent this from happening, the diamond industry spent a huge sum in making diamonds "heirloom" properties to be passed down for generations, keeping the price of diamond artificially high (so people wouldn't be tempted to unload them for fear of losing money) and discourage jewelers from buying diamonds from the public.
10. Artificial DiamondsThe idea of making artificial diamond isn't new. H.G. Wells proposed exactly such a thing in his story "The Diamond Maker" in 1911. Since then, scientists have come up with ways to create synthetic diamonds and diamond simulants like cubic zirconia - but experts could always tell them apart. Until now. In the past decade, scientists have perfected a technique called Chemical Vapor Deposition, where carbon gas cloud is passed over diamond seeds in a vacuum chamber heated to more than 1,800 degrees. In a matter of days, they are now able to "grow" diamonds that are virtually indistinguishable from natural ones, even to the experts:
Seeking an unbiased assessment of the quality of these laboratory diamonds, I asked Bryant Linares to let me borrow an Apollo stone. The next day, I place the .38 carat, princess-cut stone in front of Virgil Ghita in Ghita's narrow jewelry store in downtown Boston. With a pair of tweezers, he brings the diamond up to his right eye and studies it with a jeweler's loupe, slowly turning the gem in the mote-filled afternoon sun. "Nice stone, excellent color. I don't see any imperfections," he says. "Where did you get it?" "It was grown in a lab about 20 miles from here," I reply. He lowers the loupe and looks at me for a moment. Then he studies the stone again, pursing his brow. He sighs. "There's no way to tell that it's lab-created." (Source)But if you think that the price of diamond will fall precipitously, think again. Companies that make cultured diamonds like Apollo and Gemesis aren't stupid: they're not going to kill the goose that laid the diamond egg by flooding the market with cheap stones.
So if it takes an expert with a microscope to identify a produced diamond, why do I care? As long as it looks fine from say arms length I don't give a shit.
A lot of things are different in regards to the market today than 30(+) years ago. Fraudulent "investment diamond deals" were also very common in the early 1980s and that again was over 20(+) years ago...The specific dollar value and scarcity of a solitary $100,000 plus diamond is what makes this different than attempting to sell a "lot" of diamonds. The market today and going forward is building a position of increasing values.