The festive season is upon us and a creaking, erstwhile monopoly is trying desperately to convince its customers to keep drinking its Kool-Aid. Full-page ads of DeBeers in city supplements are urging buyers to keep buying the ‘real deal’ i.e. mined diamonds versus the vastly cheaper lab-grown diamonds. Diamond sellers like DeBeers are fighting a losing battle.
To be sure, DeBeers also sells grown diamonds (and even helped accelerate the technology), but as a cut below natural diamonds. It’s a clever strategy to protect a business that long monopolized the diamond industry by controlling the supply of rough diamonds. If DeBeers were to abandon its “natural is better” platform, then it becomes just another diamond producer—as good or bad as the lab next door.
Unfortunately for the company, though, the platform is caving in. The diamond grown in a lab is more than just similar to a natural diamond: it is identical. Even the sharpest gemologist won’t be able to tell the difference without the help of a machine.
Actually, there is no difference at all: both are made up of carbon and have the exact same physical and chemical properties. The only difference is how they are made: one is made by Mother Nature in her womb over billions of overs and the other is made in a lab in a matter of weeks.
DeBeers’ proposition hinges around the fact that buyers should care about naturally-made diamonds. Should they? Absolutely not.
In the age of ‘test-tube’ babies, quibbling over how a diamond is produced is at best specious. As we know, babies conceived in a petri dish are no different from the ones conceived in the fallopian tubes of a woman. Man’s ingenuity allowed fertilization of egg to take place outside of the woman’s body. Similarly, clever scientists and engineers figured out (using something called a high-pressure, high-temperature process) how to mimic the earth’s natural process of carbon crystallisation.
In the process, the industrial diamond manufacturers have weeded out exploitation of desperate miners, bloody clashes, artificially-inflated prices and, in sum, the ruthless control of a corporation whose history is steeped in shame.
Karma Catches Up
DeBeers was born in the 1870s after British businessman Cecil Rhodes (yes, the Rhodes scholarship is named after him) spotted an opportunity in the ‘diamond rush’ of South Africa. But he didn’t go as a miner; he went as the man who supplied equipment to pump water out of diamond mines.
Given the rush, he was soon making enough money to get banks interested in financing purchase of diamond mines. By 1887, Rhodes became the only miner of diamonds in South Africa.
But his genius lay not only in consolidating the ownership of diamond mines, but also in controlling the distribution of diamond roughs via a syndicate of merchants that came to be known as the “Diamond Syndicate”. However, Rhodes—always a man of weak constitution–died in 1902, when he was just 48 years old.
In the decades that followed, another equally ruthless businessman, Ernest Oppenheimer–who had become the gold king of South Africa–took control of DeBeers and made it even more of a monopoly. In fact, until the early 2000s, the company controlled almost 90% of the diamond market. That’s now down to 29% due to competition from new mines, particularly from Russia.
But the biggest threat to DeBeers and other diamond sellers is the advent of lab diamonds. Although first developed in the 1950s by a GE scientist, Tracy Hall, the synthetic diamonds were until recently too small to interest retail buyers. Instead, they were used in industrial applications. As the technology improved (with the arrival of high pressure, high temperature machines), labs could make bigger diamonds and start selling them in stores. According to Morgan Stanley, lab-grown diamonds accounted for 14% of diamond supply last year.
I am not surprised that the share of lab-grown diamonds is growing. However, I am surprised the share isn’t growing faster! After all, there is ZERO reason to buy mined diamonds anymore. Lab diamonds don’t require you to disembowel the earth, exploit poor workers, or pay a price that is artificially inflated.
Diamonds may be forever. But not the sort that DeBeers wants you to buy.
