Diamonds-The Biggest Lie In Marriages

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Anyone who purchases a diamond ring is starting their marriage with a lie.

Despite how funny that sounds, its true. Considering roughly 46% of marriages end in divorce it’s of little surprise that there is some level deception involved with this institution. To be clear, a person who purchases a diamond is not guilty of intentionally misleading anyone. Far from it! They are the victims in this story, the people who have been lied to, and unknowingly pass on that lie to their partners in the form of a ring. Rest assured the perpetrators of this lie will be exposed!

A Dose of Truth

Many people think of diamonds as a timeless symbol of love that humans have used for centuries. That is completely false. Engagement rings have a long history; they were used back to Ancient Egypt and Rome (who also introduced “Vena Amoris” – another lie). Diamonds were not part of the equation until the 1930’s making them a very recent inclusion. Only a few generations of humans have made any connection between diamonds and love/marriage (Archduke Maximilian’s 1477 engagement to Mary of Burgundy notwithstanding).

In reality, diamonds are not particularly rare or valuable. The prices were artificially inflated by criminal supply side tactics combined with very clever, well timed marketing. Don’t take my word for it, De Beers chairman Nicky Oppenheimer put it best in 1999 when he said “Diamonds are intrinsically worthless, except for the deep psychological need they fill.

De-What!?

Before going any further, it should be established what the De Beers corporation is and why their comments regarding diamonds have any authority.

There was a time when diamonds were truly rare and valuable. Then the 1870’s rolled around and miners began discovering major deposits of diamonds in South Africa. Where many saw an increasingly common gem, businessman Cecil Rhodes saw a huge opportunity and began aggressively buying diamond mines.

This led to the formation of the De Beers Consolidated Mines, Ltd. in 1888. Behind the scenes, a financier named Ernest Oppenheimer began accumulating shares of De Beers whenever available, and reached a controlling stake of the company by the mid-1920s. Oppenheimer then reached agreements with suppliers outside of De Beers control to sell through their distribution channel creating the Central Selling Organization or CSO, (later changed to Diamond Trading Co. or DTC) which, at its peak, controlled roughly 80% of the global market share.  In order to buy from CSO, membership as a “Sightholder” was required, which was at the sole discretion of De Beers. No price negotiations were allowed on the sales.

Controlling such a high portion of the market allowed De Beers to stockpile inventory in weaker markets to prop up diamond prices. It also allowed them to use part of that reserve to flood the Zaire diamond market when they tried to leave the CSO in 1981, causing local diamond prices to plummet from about $3 a carat to $1.75 and ultimately forced Zaire to return under their control.

The “iron fist” rule and dishonest tactics of De Beers were not ignored. In 1994 they were charged with price fixing, ultimately plead guilty with a $10 million fine, and faced an onslaught of lawsuits. Perhaps the most notable was Sullivan v. DB Investments which was settled for $295 million.

During the litigation, many mines broke away from De Beers control, reducing their share of the market. Today their market control is about 40%. The below chart shows a timeline highlighting significant developments.

chart-of-de-beers-market-share-monopoly

Some have speculated that because diamond prices have remained relatively constant as De Beers lost influence, the prices were not in fact being manipulated. It should be noted that other mines do still stockpile when demand falls to keep prices high. Following the global recession in 2008 Alrosa (which controls 97% of Russian output) sold excess diamonds to the Russian State Repository of Precious Metals rather than putting them on the open market, which would have decreased their price. In 2015 Alrosa only sold about half of the diamonds they mined. Edward Epstein published a famous piece in the Atlantic pointing out that diamonds have very little resale value. De Beers also openly admits they currently curb production in the mines as demand declines and invest that money into marketing, which helps ensure the supply commands an unnecessarily high price relative to demand, a strategy that other mines and distributors also use.

“A Diamond Is Forever”

After discovering the sad truth that diamonds are worthless, the next point of order is uncovering how they became inexorably entangled with the marriage process. As alluded to earlier, the diamond engagement ring is a very recent development that was the result of a brilliant marketing plan.

In 1938, times were tough, and De Beers hired New York ad agency N.W. Ayer to help jump-start revenue. Enter Frances Gerety, the copywriter who ended up on the De Beers account. She recalls  De Beers representative writing to inquire about “the use of propaganda in various forms”to help sell more diamonds.

N.W. Ayer proceeded to conduct consumer surveys and found many believed diamonds were “money down the drain“. Ms. Gerety recalls consumers were largely of the opinion the money would be better spent on “a washing machine, or a new car, anything but an engagement ring”. This did not deter her efforts and she set out on what is arguably one of the most successful marketing campaigns of all time.

N.W. Ayer decided to maximize the public’s exposure to diamonds, hoping to subtly influence the public’s opinion. They began lending diamond jewelry to Hollywood stars and wrote as guest columnists in newspapers to promote diamonds. To help sell smaller diamonds they added a text box on ads instructing consumers to “Ask about color, clarity, and cutting — for these determine a diamond’s quality, contribute to its beauty and value.” Frances Gerety also coined the phrase “A Diamond Is Forever,” which Advertising Age named it the slogan of the century in 1999. By the time N.W. Ayer was finished, social attitudes shifted and diamonds became the rule, rather than the exception.

Final Thoughts

In conclusion, we should all refuse to purchase diamonds and put a stop to the deception that has plagued countless marriages (and pocketbooks) for the past century. We need to remove the wool from over our eyes as a society and move on to something that is truly valuable.

KNOWLEDGE IS POWER!!

 

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