Diamonds Are For Everyone: The Rise and Fall of “Natural” Diamonds
02.19.21
When Lon Hammond proposed to The Notebook’s Allie Hamilton with a lavish table-cut diamond in 1946, he was a man ahead of his time. It would be a full year before diamond cartel De Beers brainwashed the masses with its brilliant “A Diamond Is Forever” ad campaign and convinced six subsequent generations of men to blow two months of their salary on a carbon chip. Sadly, good looks and fashionable taste don’t count for everything: Allie ultimately chose Noah, a penniless stalker, instead.
As Frances Gerety, the Ayer copywriter behind the classic slogan recalled, many women in the 1940s regarded money spent on a diamond as a wasteful act. They urged their fiancés to spend the money on “a washing machine, or a new car, anything but an engagement ring.” Women were the ones exerting downward pressure on price, not men.
But N. W. Ayer & Son — the famed advertising agency most responsible for a glut of mid-century smokers — didn’t stop with the slogan. It embarked on a siege of Hollywood, loaning young starlets opulent diamond jewelry with the understanding that they would appear in a film while wearing the product. To Catch a Thief, The Pink Panther, Gentlemen Prefer Blondes — each film portrayed diamonds as glamorous objects worthy of adoration and pursuit, culminating in Marilyn Monroe’s bleak 1953 headliner, “Diamonds Are A Girl’s Best Friend.” One Hollywood press agent was paid $425 a month to ensure that photos of diamond-donning starlets made their way into popular magazines. An Ayer publicist put it frankly: “The big ones sell the little ones.”
The brainwashing worked. In 1940, just one in ten first-time American brides received a diamond engagement ring. By 1990, that number climbed to eight in ten. But, six generations later, the diamond myth doesn’t go down so easy. The global diamond industry faces steadily decreasing prices, greater sociopolitical scrutiny, and the unstoppable rise of lab-grown diamonds — a competitor so compelling, no seasoned jeweler can tell them apart because they are, in fact, the same.
The De Beers Cartel
Until the late nineteenth century, diamonds were only found in the remote jungles of Brazil or scattered across the riverbeds of India. Global production totaled a few pounds a year. In 1870, that all changed when the Kimberley deposits were found in South Africa, and diamonds were suddenly available by the ton. Royals, repulsed at the idea that diamonds were now a “common” stone, demanded emeralds, sapphires, and rubies instead. Cecil Rhodes, an early British mining magnate, attempted to consolidate supply by forming the De Beers Consolidated Mines. Despite his best efforts, by 1919 diamonds were devalued by nearly 50%.
Rhodes’ successor, Ernest Oppenheimer, was more successful, insisting that “common sense tells us that the only way to increase the value of diamonds is to make them scarce, that is, to reduce production.” De Beers formed a distribution channel — the Central Selling Organization (CSO) — which controlled the supply and price of diamonds presented to buyers. Thus began a global price-fixing scheme that lasted for nearly eighty years. De Beers controlled all the diamond mines in southern Africa in addition to owning diamond trading companies in England, Portugal, Israel, Belgium, Holland, and Switzerland.
Until the close of the 20th century, De Beers sorted, valued, and sold over 80% of the world’s diamond production. De Beers was never allowed to operate directly in the U.S., and finally lost its stranglehold in the late 90s following a number of anti-trust violations and excess supply found in Australia, Russia, and Canada. Today, just five companies — Alrosa, De Beers, Debswana Diamonds, Rio Tinto, and Dominion Diamond — control nearly 80% of the world’s rough diamond production.
An Issue of Provenance
The diamond industry’s publicity woes began in 1998, when Global Witness, a small NGO, released a damning report — “A Rough Trade” — that accused the De Beers cartel of fueling mass murder in war-torn African nations. Public awareness grew in 2006 when Leonardo DiCaprio starred in Blood Diamond and began his sudden transition from Hollywood heartthrob to tree-hugging environmentalist. Images of doped-up soldiers hacking off the limbs of poor voting villagers flooded the Western conscience, and De Beers was shamed into withdrawing from war zones.
The UN developed the Kimberley Process, a certification scheme designed to stop “conflict diamonds” from entering the rough diamond market, yet many critics maintain that it has failed to sufficiently clean up the diamond supply chain and promotes false confidence among consumers. A 2018 report from Human Rights Watch, which investigated major jewelers including Cartier, Bulgari, Pandora, and Tiffany & Co, found that “none of the companies can identify all of their diamonds’ individual mines of origin.” As late as 2020, Tiffany’s became the first global luxury jeweler to disclose country of provenance.
A Diamond Is A Diamond Is A Diamond
When Diamond Foundry, a sustainable lab-grown diamond producer backed by DiCaprio, created its first stones in 2015, they came out brown (“Cognac,” said a kind reviewer). “It turns out producing white diamonds is rather hard,” admitted Foundry. Three years later, with the colorization process down pat, Foundry released RED, the first man-made diamond auctioned by Sotheby’s for $256,250.
Thanks to crucial advances, including productivity gains made by Chemical Vapor Deposition (CVD) technology, steep cost cuts were possible. The CVD method arranges diamond seeds in rows — as if on a cookie sheet or waffle maker — and blasts the hell out of them with super-heated hydrogen and methane, until they expand like miniature muffins. “Given the pressure required to create lab-grown diamonds, it’s akin to the Eiffel Tower being stacked on a can of coke,” explained one diamond grower. The diamonds are fully grown in under a week.
Today, it costs $300 to $500 per carat to produce a CVD lab-grown diamond, as compared to $4,000 per carat in 2008. On average, a lab-grown diamond is 30% — 40% cheaper than a mined diamond. Perhaps the most telling sign of where the lab-grown industry is headed occurred in 2018, when De Beers choreographed a dramatic reversal from its “Real is Rare” stance and announced its own line of lab-grown diamonds, Lightbox Jewelry.
But there would be no sophisticated “Forever” marketing campaign for Lightbox. De Beers has no branded association with the line, and quickly positioned the jewelry as barely a cut above Mardi Gras beads. David Prager, the company’s executive vice president of corporate affairs, explained that people “see them as pretty and sparkly and fun, and they should be marketed accordingly. You can buy Lightbox for a beach holiday, because you’re not worried if you misplace one of your diamond lab-grown studs. You can go on the website, and you can buy one to replace it.” (At $800 dollars a minimum, Prager must be imagining some bird-brained beachgoers).
Bruce Cleaver, chief executive of Lightbox, went a step further: “Synthetics… are not real diamonds in my book,” said Cleaver. “They aren’t rare or given at life’s great moments. Nor should they be.” Fine for a tawdry sweet sixteen or a little girl’s Frozen costume, but absolutely tasteless for an engagement.
In fact, “synthetics” are very much real — in 2018, the US Federal Trade Commission stopped distinguishing between “natural” and man-made diamonds because, as per its ruling, “it is no longer accurate to define diamonds as ‘natural,’ when it is now possible to create products that have essentially the same optical, physical, and chemical properties as mined diamonds.” Eric Swanson, a St. Louis-based jeweler, reports that his clients perceive lab-grown diamonds as just another varietal of diamond. “Some flowers are grown in a field, and some are grown in a greenhouse. This is the same thing. Chemically, it’s the same.”
Diamonds Will Face Oversupply
Another issue the diamond industry will have to contend with is the new flood of supply from previously mined diamonds. Baby Boomers were the first generation to purchase diamonds en masse. At one point, it was estimated that boomers bought 40% of the global supply for over 20 years, resulting in a hoard of over 500 million carats that will make their way back into the supply chain over the next few decades. “There are 97 million Americans that are baby boomers or older. What’s going to happen to the jewelry?” asked Martin Rapaport, famed founder of the Rapaport Diamond Report, an industry pricing bible. “They say a diamond is forever, but little old ladies are not necessarily forever.”
To exacerbate the new wave of supply, younger generations are less likely to get married or choose a diamond for their engagement ring. That’s a problem when bridal rings represent about 33% — 40% of diamond demand. And men are no longer the dominant buyers: in 2019, self-purchasing women accounted for about one-third of the $43 billion U.S. sales. De Beers, cognizant of changing gender dynamics, launched a “For Me, From Me” ad campaign in 2019 targeted towards self-purchasers.
Diamonds Are For Everyone?
If lab-grown diamond production continues to scale, Citi predicts that lab-grown diamonds will account for 10% of supply by 2030 (today that percentage rests between 2–3%). Paul Zymnisky, a leading diamond global industry analyst, believes that mined diamond production will fall regardless. “I think if we look fifteen, twenty years out, natural diamond production will probably be half of what it is today.”
Mines eventually deplete themselves and building a new large-scale mine costs north of $1B+. “Independent miners tend to have a lot of debt on the balance sheet, at least at the early stages of production, which puts the pressure on,” said Zymnisky. “Given that diamond prices have been flat to down in recent years, it has been a difficult environment especially for miners with new mines.”
Combine exorbitant start-up costs with environmental and workplace hazards, and man-made alternatives look even more appealing. Lab-grown diamonds also hold great industrial potential, attracting continued investment from governments and companies hoping to use them for a number of synthetic diamond technologies, including quantum computers, high-powered CO2 lasers, and more efficient semi-conductors.
Still, some scoff at the idea of lab-grown diamonds ever being elevated from the ranks of fashion jewelry or industrial usage. Alisa Moussaieff, revered “Queen of Diamonds” and head of Moussaieff Jewelers, one of the industry’s most discreet jewelry houses, feels no competitive threat. “Lab-created diamonds may affect the lower part of the market, but it will never affect the real gems. There will be no disruption. Very expensive diamonds are still bought for investment purposes, an investment that holds its value.” Besides, she added, a lab-created stone hardly counts as jewelry. “I would consider it an ornament. An ornament can be made of silk. It can be made of steel. And it can be made of a lab-created diamond.”
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