Tuesday, January 13, 2015

Your Diamond is Worthless.


If you're a married lady, or are engaged, odds are that a diamond ring is on your hand. For countless decades, diamonds have been considered the go-to gift when a man proposes to a woman.

And it's completely and utterly ridiculous.

Why, you are surely asking?

Because diamonds are a crafty marketing ploy to separate you from your money. I'll explain.

Up until 1870, diamonds were indeed rare and precious. Only the wealthiest sultans and kings owned them. Suddenly, a series of massive diamond mines were found in South Africa. This discovery made diamonds extremely plentiful, thereby sending the price of diamonds down to almost nothing. To counter this massive financial loss, a man named Cecil Rhodes purchased all of the diamond mines in South Africa. He had conquered the market by 1888. By monopolizing the diamond mine market, Rhodes was able to artificially control the output of diamonds, thereby sending their value back up. One of the biggest mining companies Rhodes purchased was owned by the DeBeers Brothers. As the conglomerate of diamond mining companies grew, Rhodes' organization took on the DeBeers name. DeBeers continued to grow larger and larger as more diamond mines were uncovered around the world. The company absorbed these new mines as they popped up. Because they could control the number of virtually all the diamonds mined in the world, DeBeers could set the price of diamonds at any level.

Throughout the Twentieth Century and into the Twenty-First, DeBeers has operated the Central Selling Organization. This is the "marketplace" where diamonds are sold at wholesale to purchasers for jewelry production.

You heard that right -- not only does DeBeers control nearly all global diamond mining activity, but they also operate the supply chain which puts diamonds in the hands of jewelers. This still holds true to this day, even though DeBeers was forced to settle an anti-trust lawsuit with the US Government in 2000. Why? Because of their successful world-wide marketing strategy.

And this, my friends, is where the plot thickens...

By the time of the Great Depression, demand for diamonds had fallen dramatically in the United States. The reason why is obvious -- people were broke. Most Europeans hadn't caught on to the idea of owning a diamond, either (because most citizens there were wise to the DeBeers scam). To increase their profits once more in the commercial sector, DeBeers turned to the marketing firm of N.W. Ayer and Son. They're famous for creating the Morton Salt Girl and the catchy "Be All You Can Be" Army slogan, amongst a slew of others. In the 1930's, the marketing firm's president was Gerold M. Lauck. Once hired, Lauck completed an extensive research study about diamond engagement rings. His results weren't surprising -- to sell diamond rings, you have to attract men. Lauck keenly realized that to increase profits for DeBeers, he needed to craft diamonds as the ultimate symbol of love. Accordingly, Lauck also determined that women needed to desire diamond rings, in so much as to expect them when being asked for their hand in marriage.

Immediately, Lauck implemented a dastardly marketing campaign that encompassed nearly all aspects of public and social life. He paid for diamond rings to appear in movies and in magazines. Fashion designers were "encouraged" to feature diamonds on their models. Radio and television programs had placement advertising, which reinforced how owning a diamond ring was a lofty status symbol. Men were told that giving your fiancee the biggest diamond you could afford was the proper thing to do. Women were told that they deserved a large diamond ring because they were special. Lauck was a pure genius. With DeBeers' money, he created one of the most successful marketing campaigns this world has ever known. It was during this campaign that the famous slogan "A Diamond is Forever" was born. Within only a few months, Lauck's campaign strategy increased American diamond sales over fifty percent! To this day, the Lauck campaign is still in full effect. And to think... a commercial-grade diamond has nearly ZERO intrinsic value.

One of the most common DeBeers advertisements.

Consider a report published by The Atlantic magazine in 1982. They studied the history of diamonds, as well as how much a diamond is really worth. Within this widely lauded report, it revealed that the Ayer marketing firm constantly stayed on top of their marketing strategy and made adjustments when and where necessary. Because so many diamonds were in the hands of the public by the 1950's, they were forced to address the massive diamond supply that could potentially be resold, thereby sending prices down. To do this, Ayer created new marketing tactics which encouraged women to value their diamonds more than anything else in their possession. Concurrently, they promoted the notion that diamonds should never be resold. Their marketing strategy again worked -- to this day, it is nearly impossible to find a person that will resell a diamond (either gifted or inherited).

Here's the damning part, though. That same Atlantic report also proved that diamonds depreciate dramatically the moment they leave a jewelry store. The markup on a diamond can be upwards of 200%! As such, a jeweler will not typically buy a diamond back from a customer. Why? Because they have little incentive to do so, even though they could flip the diamond for a small profit. Even if the jeweler did want to repurchase the "used" diamond, their offer would be extremely low. As such, they'll avoid the situation altogether because making a low offer would illustrate how invaluable a diamond really is. If the public truly knew diamonds were not valuable, then they'd stop paying such high prices for them. Essentially, refusing to repurchase the diamond keeps the myth going.

Remember that slick Ayer marketing strategy I mentioned before? One such tactic was to present diamonds in movies as objects which thieves often wanted to steal. In reality, high-level thieves and burglars will rarely, if ever, steal diamonds. They know that it's next to impossible to resell them. Why risk being apprehended for little to no profit? Yet, to this day, heist movies will still show crooks swiping diamonds.

And there you have it my friends. Diamonds are absolutely worthless. Over ninety percent of all profit made from diamonds goes to the DeBeers Cartel. They control the supply. They control the demand. They control your thoughts, even.

Ladies... take a look at that shiny rock on your hand. Understand this -- it is not really valuable. The man (or woman) whom gave that diamond to you was fooled into thinking it was a prized possession. What you have is a very common, mildly lustrous stone. Many generations of Americans before you were tricked into thinking diamonds were important. Their children were taught the same thing, and so on and so forth. You now continue to prop up the diamond myth. You're just the latest victim in a long string of parlor tricks and misinformation, all thanks to greedy tycoons and one of the most brilliant marketing tactics ever devised.

3 comments:

  1. Ahh...a real life Inception on the American mind as a whole. Who starred in the movie Inception?

    The same that starred in the movie Blood Diamond.

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  2. Wow, incredible post. The overall look of your post wonderful, I really like that. I would also like to bye such beautiful diamonds. I already have some loose diamonds which I get from Wholesale Diamonds San Diego. They are so beautiful and unique. Thanks for sharing.

    ReplyDelete
    Replies
    1. I believe you completely misunderstood the point of my blog, mate. Try reading it again.

      Delete