Is the $90 million Lesedi La Rona diamond actually worthless?
How a clever cartel dreamed up the ingenious scam of the diamond market, and why couples happily play along
By Meagan Day
The Lesedi La Rona, a 1,111 carat diamond the size of a tennis ball, went on auction in London Monday. Found in Botswana late last year, it’s the largest gem-grade diamond excavated in over a century, and the second-largest of all time. It could fetch up to $90 million — almost double the record price for a diamond purchase.
Which is absurd, considering that the Lesedi La Rona, like all diamonds, has no intrinsic value.
Even industry executives have no problem admitting that diamonds are a totally artificial market. According to Nicky Oppenheimer, former chairman of the De Beers Group, “Diamonds are intrinsically worthless, except for the deep psychological need they fill.” David Prager, also of De Beers, explained the diamond paradox in greater detail:
The truth is nobody needs a diamond. You don’t need a diamond to heat your home, run your car or power your cell-phone. As a business, it’s clear to us that there is only one source of value for diamonds — and that is the consumer’s desire for the product. 99% of diamond demand is from the jewellery industry, less than 1% goes to industrial uses. For that 99%, diamonds represent a cultural phenomenon. They signify all the values that people recognise as being attributable to the stone — love, commitment, marriage, relationship, the birth of a child, accomplishment and so on. More than just being a luxury item, they are pieces that represent milestone moments — that’s why they’re important.
Diamonds are beautiful to look at and uniquely durable, but those qualities alone didn’t endow the stones with exceptional worth. It was their scarcity that elevated them to a special status, beginning in India in the 4th century BC. Diamonds started to appear in European jewelry in the 13th century, and carried an aura of rarity and exoticism, connoting wealth and status. Louis IX passed a law reserving diamonds exclusively for royalty, and that was the norm for several centuries, though by the 17th century they had started to make their way into the personal collections of wealthy European merchants.
But the current diamond bubble is the product of a wholly different set of circumstances. It originated with a crisis. Massive diamond mines were discovered in South Africa in 1870, and at first the British-operated companies that had been conducting the excavation were overjoyed. But they soon discovered a problem — the African continent was found to contain vast diamond mines, which meant the stone was no longer rare. Until then, its rarity had been the sole basis of its value.
The industry was in danger of crumbling under the weight of the discovery. But the gem barons had a plan to solve the supply-and-demand problem. In 1888, several powerful mining companies banded together under the leadership of British businessman Cecil Rhodes to form a single entity: De Beers Consolidated Mines, Ltd. At the height of its power in the 20th century, De Beers operated all the mines in southern Africa, and had operations in Israel, Belgium, England, Portugal, Switzerland and Holland. It owned 90% of the market and acted like it — stockpiling diamonds, fixing prices, and punishing competitors who refused to play by its rules.
With the global diamond supply firmly under its thumb by the 1930s, De Beers turned its attention toward creating demand. Diamonds were no longer the exclusive province of royalty, and to keep them valuable De Beers needed to invest them with worth based on some criteria other than sheer rarity. So in 1938 it tasked American advertising firm N.W. Ayer with creating a new diamond market focused on the American middle class.
Ayer came up with a brilliant strategy: link diamonds with romance and courtship. “Sentiment is essential to your advertising, as it is to your product,” Ayer said in a memo to De Beers, “for the emotional connotation of the diamond is the one competitive advantage which no other product can claim or dispute.” The idea was to turn the diamond’s durability into a metaphor for eternal love.
In 1947, a female copywriter named Frances Garety proposed a game-changing slogan: “A Diamond Is Forever.” Advertisements portrayed the diamond engagement ring as a compulsory rite of passage, the only correct way for a young man to propose marriage.
Diamond engagement ring sales exploded by 55% in just two years. In 1951, Ayer declared victory, noting in a memo that “for a number of years we have found evidence that the diamond engagement ring tradition is consistently growing stronger. Jewelers now tell us ‘a girl is not engaged unless she has a diamond engagement ring.’”
Through all this, the diamond remained the same: a chunk of compressed carbon. Its only value to the average consumer is the value culturally invested in it. But once you hit a critical mass, value begets value — and today, 75% of American brides wear a diamond engagement ring, which costs an average of $4,000. The diamond ring is also catching on in China, where the middle class is exploding.
The stratospheric price of the Lesedi La Rona is all part of the routine. As Ayer’s mid-century ad execs liked to say, “the big ones sell the little ones.” This is why diamond companies loan gems to Hollywood starlets — public glamor helps keep diamonds relevant and coveted, even though their scarcity is now an illusion.
Because the diamond industry has received bad press in recent decades due to blood diamonds and abject mine conditions, it’s more important than ever that the industry keep up appearances. Highly publicized sales like the Lesedi La Rona are an integral component of those optics. Like all diamonds, it’s pretty by nature, pricey by nurture. At the end of the day, it’s just a rock.
