Why Are Diamonds So Expensive?

It’s no secret that diamonds are some of the most luxurious gemstones in the world. However, the fact that they aren’t exactly a rare find is also common knowledge. So, how did they become so expensive? In this article, we will discuss their history, as well as the clever advertising campaign that earned them their status.

The Industry and Its Beginnings
It’s no secret that the most striking images of diamonds ingrained in our collective subconscious and popular culture alike are rather recent. But in spite of the gemstone’s spike in popularity over the course of the last century, its history is anything but recent. In fact, the first mention of the jewel in written form dates all the way back to the first century A.D.

It was then that Roman naturalist Pliny noticed their beauty, and he wrote that the “diamond is the most valuable, not only of precious stones but of all things in this world.” Nevertheless, its saga began even before that epoch. Some historians attest that diamond gathering commenced in India in the fourth century B.C.

The inhabitants of the region collected the jewels from rivers and streams and then proceeded to trade them. As their caravans traveled to the markets of Venice during the Renaissance, more and more members of Europe’s elite started adorning their outfits with glistening rocks of great value. By the 1400s, it had become a true fashion trend.

However, India’s diamond trade declined by the 1700s. Brazil saw the opportunity and gained control of the market, which it dominated for the next 150 years. However, what truly set the tone to this commercial practice’s widespread success was the discovery of an abundant diamond deposit in South Africa in 1866. It was during that time that the De Beers cartel took off.

De Beers: A Legacy of Cunning Marketing
In 1869, miners in Hopetown, South Africa, unearthed the first large diamond the world had ever seen. Known as the ‘Star of South Africa’ the gem weighed a whopping 83.5 carats. De Beers founder Cecil Rhodes rented water pumps for the operation during this time. Nine years later, he started buying shares until he dominated the market almost entirely.

By the 1900s, British investors owned 90% of the available supply. This is how De Beers Consolidated Mines, Ltd. was created. Rhodes ran the venture as a cartel, and it soon turned into a monopoly. It took down its competitors one by one, remaining one of the most successful cartel commerce operations in modern history.

The businessmen behind the scenes perpetuated myths about the uncommonness and immense value of the gem, even when the reality was completely different. Diamonds aren’t rare, just cleverly marketed. But how can something that isn’t as exceptional as a sapphire or ruby cost five times more per carat?

The answer lies in the company’s uniquely aggressive sales method. An investigative journalism piece published in The Atlantic by renowned writer Edward Jay Epstein titled Have You Ever Tried to Sell a Diamond shed some light on the matter in 1982. When the Great Depression of the 1930s hit, and the De Beers group was faced with abundant supply and scarce demand.

Harry Oppenheimer, the 29-year old son of the cartel’s founder, traveled to New York in 1938 to meet with the president of lead advertising agency N.W. Ayer. The Morgan Bank, another player which helped Oppenheimer’s father consolidate his De Beers empire, had recommended Gerold M. Lauck, the firm’s president.

Together, the two launched the most effective campaign of commercial “propaganda in various forms” known to date. How could they convince young men and women to buy their diamonds? By marketing towards engaged couples, of course. Prior to this, diamond engagement rings weren’t the norm at all.

Diamonds

Once the 1940s rolled around, the well-established slogan “A Diamond Is Forever” had been created. What is more, De Beers encouraged young grooms to spend their three month’s salary on an engagement ring for their betrothed. The cartel created a tradition in its own rights that are still being followed today, especially in the United States of America.

Diamonds and Their Value Today
The immense value diamonds have today is more or less dictated by the wide-reaching advertising campaign enforced by De Beers in the late thirties. As a consequence, the diamond engagement ring is still a staple of the rich and famous that many working-class couples dream of emulating at a smaller scale.

Just this summer two of the most high-profile pairings in showbiz at the moment promised their forever with its help. Ariana Grande was offered a 100,000-dollar pear-shaped three-carat diamond as a result of her recent whirlwind romance with comedian and Saturday Night Live regular Pete Davidson.

Pop’s most coveted dream boy Justin Bieber also sealed the deal with his stunningly gorgeous supermodel girlfriend Hailey Baldwin with a ten-carat oval gem from Solow & Co. And this is just in the months of June and July 2018. Over the years, plenty of famous women received theirs, including Kim Kardashian West, Paris Hilton, Cardi B, and Britain’s sweetheart Meghan Markle.

In addition to this, showing off ‘the rock’ on social media contributes to the phenomenon as well. This modern addition to our shared behavior surely wasn’t planned by the De Beers cartel as carefully as the engagement scheme, but it sure did work out to its advantage. As long as some women have diamonds, others will want them as well.

The technique of adorning famous and beautiful women with diamonds is nothing new. Jewelers have been doing it for many decades now, and as they continue to fuel this image, so will people keep on lusting after gems. This just goes to show how far a well-thought-out and can take you if you know how to time it.

It is expected for diamonds to remain the most high-class commodity for many years to come. After all, their prices rarely fluctuate, which is why they are the ideal security investment. And as long as people buy into the apparent custom behind it, there is no reason why their reign won’t last for centuries.