Everyone has heard of diamonds and how valuable and rare they are. But, wait a moment, the number of people I know that have diamonds is completely disproportionate to the rarity factor of other gemstones. How many people do you know that have rubies, emeralds or sapphires, let alone tsavorites and spinels? Diamonds must actually be one of the most common gemstone around. I would go so far as to say that, if it was not for the meeting of Gerold M. Lauck, the president of N. W. Ayer, a leading advertising agency in the United States and Harry Oppenheimer, son of the founder of De Beers in 1938, diamonds would probably have gone the way of amethysts and become classified as semi-precious, after the finds of huge deposits in South Africa.

As the hardest mineral on earth diamonds are difficult to cut. You need a diamond to cut a diamond. This meant that, although diamonds were treated as sacred objects, particularly in India, there was no way to cut them as we see them today. They were originally polished rough stones. From the 14th century up to 19th century cutting evolved and it wasn’t until the late 19th century that the technology had developed to cut diamonds in the way that we recognise today. In 1919, the Round Brilliant Cut, which is the current industry standard, was developed Marcel Tolkowsky.

Loose Polished Rough Diamonds

Up and till the mid 19th century diamonds were mainly found in India and Brazil and were considered precious. In 1870 this all changed when huge deposits were found in South Africa. This oversupply has been a constant problem for miners , wholesalers and retailers up and till today. Enter the De Beers’ Cartel, one of the most successful cartels in history and with it the reinvention of diamonds.

Diamond Production 1600- 2000s

The diamond [re]invention is far more than a monopoly for fixing diamond prices; it is a mechanism for converting tiny crystals of carbon into universally recognized tokens of wealth, power, and romance. To achieve this goal, De Beers had to control demand as well as supply. Both women and men had to be made to perceive diamonds not as marketable precious stones but as an inseparable part of courtship and married life.

In 1938, Europe , where diamonds  had never really caught on as an engagement gift ,was on the brink of war. Globally, prices for the stones had collapsed and the De Beers cartel, which at this point controlled 99% of diamond production, was selling nearly all its stock into America, where the average retail sales price was U$80 (U$D 1,400 at 2018 prices) for a small standard diamond ring. (Post the Lauck/N.W Ayer  marketing campaign [see below] that same type of ring today would  cost at today’s prices between U$D 4,500 to U$D 6,500).

Solitaire Diamond Ring

The man who changed everything was Gerold M. Lauck, President of N.W.Ayer and Marketing Supremo.

Gerold’s plan was to;

‘… romanticize diamonds required subtly altering the public’s picture of the way a man courts — and wins — a woman, the advertising agency strongly suggested exploiting the relatively new medium of motion pictures. Movie idols, the paragons of romance for the mass audience, would be given diamonds to use as their symbols of indestructible love. In addition, the agency suggested offering stories and society photographs to selected magazines and newspapers which would reinforce the link between diamonds and romance. Stories would stress the size of diamonds that celebrities presented to their loved ones, and photographs would conspicuously show the glittering stone on the hand of a well-known woman. Fashion designers would talk on radio programs about the “trend towards diamonds” that Ayer planned to start. The Ayer plan also envisioned using the British royal family to help foster the romantic allure of diamonds. An Ayer memo said, “Since Great Britain has such an important interest in the diamond industry, the royal couple could be of tremendous assistance to this British industry by wearing diamonds rather than other jewels.” Queen Elizabeth later went on a well-publicized trip to several South African diamond mines, and she accepted a diamond from Oppenheimer.’

In addition, the nationwide advertising campaign focused reproductions of famous paintings by such artists as Picasso, Derain, Dali, and Dufy, to reinforce the concept of a diamond being a ‘work of art’.

The results were phenomenal, by 1941 diamond sales  had increased by 55%! This was a new concept in advertising that according to Ayer, has been widely imitated ever since. ”There was no direct sale to be made. There was no brand name to be impressed on the public mind. There was simply an idea — the eternal emotional value surrounding the diamond.” 

The agency then commissioned a series of portraits of “engaged socialites.” 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.'”

De Beers needed a slogan for diamonds that expressed both the theme of romance and legitimacy. An N. W. Ayer copywriter came up with the caption “A Diamond Is Forever,” which was scrawled on the bottom of a picture of two young lovers on a honeymoon. Within a year, “A Diamond Is Forever” became the official motto of De Beers. Stage One of the reinvention of the diamond had been completed.

Ayer then moves to Stage Two. In this stage Ayer applied Thorstein Veblen’s idea, stated in The Theory of the Leisure Class, that Americans were motivated in their purchases not by utility but by “conspicuous consumption.” “The substantial diamond gift can be made a more widely sought symbol of personal and family success — an expression of socio-economic achievement,” N. W. Ayer said in a report. To exploit this desire for conspicuous display, the agency specifically recommended, “Promote the diamond as one material object which can reflect, in a very personal way, a man’s … success in life.”

By 1979, N. W. Ayer had helped De Beers expand its sales of diamonds in the United States to more than $2.1 billion, at the wholesale level, compared with a mere $23 million in 1939. In forty years, the value of its sales had increased nearly a hundredfold. The expenditure on advertisements, which began at a level of only $200,000 a year and gradually increased to $10 million, seemed a brilliant investment. This was how one company, DeBeers, and an advertising agency, N.W. Ayer, turned the abundance of diamonds into the social value commodity that it is today.

Global Diamond Production

Just to give you a feel for how abundant diamonds are. Global diamond production in 2018 was estimated at 145 million carats, of which circa 47% were ‘gem’ or ‘near gem’ quality. The rest being used for industrial purposes. Total diamond production from antiquity to the present day is estimated at 5 Billion carats, or 1,000 metric tonnes, of which half are probably gem quality. That is the equivalent of  ‘one carat worth of diamonds’ for every 1 in 3 peoples in the world.

If you compare diamond prices to gold; it is estimated that there are, in total, 190,000 metric tonnes of gold in the world. 24kt Gold is currently priced at U$48 per gramme. One gramme is the equivalent of 5 carats. So  a ‘1 carat weight equivalent’ in gold would retail conservatively at U$9.6 (for 0.2gms). A 1 carat D VS2 brilliant round diamond retails at circa U$6,000. A percentage difference in price of 3,241% on gold. Of course not all diamonds are D quality but then again most gold is sold at 18kt and below, not 24kt. You decide if this abundance of rarity warrants the price differential.

How do diamond prices compare to the other big 3; rubies, sapphires and emeralds.

IGS Diamond Value Chart

Note that these prices are just guides, as each gemstone is unique. There are also other stones such as some garnets, alexandrite and spinels  that command similar prices and are rarer.

Diamond Ring

My view is don’t not buy a diamond but be aware that it is not an investment, you will not get back anything near what you paid for it retail. It will probably not keep pace with inflation, especially as the DeBeers’ hold on the supply monopoly is slipping, with more diamonds coming onto the market from Canada and Russia, prices are slipping. There is also growing competition from lab grown diamonds, which are exactly the same chemical composition as natural diamonds, just created in a lab and sell at a discount.  For the same amount of money I would consider a better buy to be a good quality ruby, sapphire, spinel or instead of an emerald, a tsavorite garnet, which are far rarer, have better colour & durability and are not treated.

If you opt for a coloured stone, you’d also probably get a something bigger for the price and have the wider  choice of red, blue, yellow, green, purple, pink and all the shades in between.

For further reading have a look at:

Are Diamonds Really Rare? Diamond Myths and Misconceptions

The real reason why your diamonds aren’t valuable

Coloured Gemstones Have Got Their Sparkle Back

Spinel, the great “imposter” of gems, is making a grand comeback

Blue sapphire engagement rings that are anything but traditional

The Tsavorite Garnet and Mahenge Red Spinel