Have You Ever Tried to Sell a Diamond? (1982) | Hacker News Reader

Have You Ever Tried to Sell a Diamond? (1982)

theatlantic.com

279 pointsolalonde225 comments

Wow, absolutely brilliant. I can't believe this article popped up on HN's front page tonight. I just got back from looking at engagement rings with my girlfriend.

I've known about this monopoly for a while, and so has she. Heck, one of the first movies we watched together when we first started dating 7 years ago was Blood Diamond. Here's the conversation we had while in the jewellery store tonight.

Me: "Sweety, I really don't want to buy you a diamond. I really would rather buy you something that at least has some more value associated with it, like a sapphire."

Her: "Well, I've always pictured a diamond ring. That's what everyone gets."

Me: "Well, what do you like about the diamond that the sapphire doesn't give you?"

Her: "I like the sparkle."

Me: "Ok, that's fair. What about moissanite? (Link: http://en.wikipedia.org/wiki/Moissanite) It's supposedly even more sparkly and brilliant than diamonds."

Her: "What's it made of?"

Me: "You know how diamond is just carbon? Moissanite is silicon and carbon in the same type of crystal structure."

Her: "And it's natural?"

Me: "Well, it can occur naturally, but it's extremely rare. So the ones you buy are usually created in a lab, but are more brilliant than a diamond, but actually cost less. I can apparently get a 1.5 carat stone for $800."

Her: (annoyed) "I don't want something fake!"

Me: "Oh, so it's not about the sparkle then?"

I swear, De Beers has probably pulled off the greatest marketing stunt in the history of humanity. The fact that it's so ingrained in our minds, to the point where a smart, educated, and informed person like my girlfriend still wants a diamond even after knowing all the issues with them, is fascinating.

Honestly, as a community of people in the startup ecosystem, we could stand to learn a thing or two here.

There are a lot of irrational things that smart, educated, and informed people believe in. Not to start a flamewar, but God is a great example of this.

A belief in a higher power can easily be a rational decision.

and here we gooooo

Interesting: how can a belief ever be a rational decision? Isn't it irrational by definition?

Look up Pascal's wager. Te postulates are debatable, but it's certainly a rational argument.

He doesn't really show that it is possible to believe something intentionally, though.

I think it's certainly possible to make an intentional decision to train/brainwash yourself into believing in something.

Pascal's wager is interesting but it makes a core assumption that makes it laughable - namely which God/religion/deity do you bet on?

The positive sum that the wager demonstrates in a belief in a God is nullified when you divide by the number of Gods/religions/deities in existence (many thousands/millions). Indeed - if you factor exclusive Gods/religions/deities that condemn separate beliefs - the wager goes negative since holding many beliefs that negate each other, with the addition of trying to believe them all, will cost you much more than just not doing so.

This assumes pure "afterlife" expected probabilistic value - I'm ignoring societal pressures which would eliminate this problem of many Gods/afterlife and replace it with "Believe in what we do - or die!". Then it's not Pascal's wager any more - it's believe or die because others force you to.

If you lived in a society that killed/tortured atheists for not believing, it would be extremely rational to (assuming that you value your life over your advertised beliefs), at the very least, pretend that you believe in whatever bullshit people want you to believe.

Pretending to believe is not believing, though.

True. To the outside world it is equivalent though.

Furthermore - there's a saying that "believe in it long enough - and you'll think it's true". So you have to be careful with that - sometimes appearances become deceiving (what you show becomes what you are).

All things you think you know are ultimately founded on axioms, beliefs.

Why do you trust sense-data to be real? Brains in vats, holosuites, yada-yada ...

Reality is that which is practical for us to concern ourselves with. When there is an indication that such a notion might be practical knowledge, then I'll give it some consideration.

>Reality is that which is practical for us to concern ourselves with. //

By that definition reality is completely subjective which rather plays towards my point.

You find the axiomatic basis of scientific understanding to not belong to "practical knowledge". Or that the axiomatic nature of standard logics is not practical? So basically all of physical science, mathematics, logic, ... understanding the epistemological basis of these things is impractical? Because? On such a position theoretical physics would seem to be 'impractical' and not something to concern ourselves [humankind] with - the advances in theoretical physics in the last century or so have worked themselves in to almost all areas of modern 'Western' life.

Until work in theoretical physics yields practical or verifiable results, I am content to consider it fantasy rather than reality. Not to denigrate those who spend their time on such matters, and the social considerations those people have for their peers might make such pursuits somewhat practical for them, but you cannot expect a randomly selected person to consider such knowledge a part of their reality until it has substantial implications for them.

And we do agree that reality is subjective; it's just that if a facet of reality is only perceived by a small fraction of the population, its value is insignificant to most. The value of reality is in its adoption as a foundation for communication.

Lol.

Simple example that many people use day-to-day is relativity and GPS (eg http://www.astronomy.ohio-state.edu/~pogge/Ast162/Unit5/gps.... <- that's just the first likely looking Google result for GPS+relativity, feel free to look for yourself).

I guess things like transistors, fibre optics, nuclear power, and lasers are so far removed from everyday life that theoretical physics simply has no application to reality. /sarcasm

I meant until a particular theory in theoretical physics is found practical, or at least verifiable, it's more fantasy than reality as far as most people are concerned. I never meant to imply that the entire field of theoretical physics is impractical or irrelevant, or that it hasn't yielded any results. At that point, I might expect the physics to fall less in the domain of the theoretical however, and more in applied.

If it makes you happy then it's rational.

>Honestly, as a community of people in the startup ecosystem, we could stand to learn a thing or two here.

Yup. Bang on.

Apple does a line in 'oh, but you didn't get an Apple' better than anyone else (they aren't a startup but once were)

>I swear, De Beers has probably pulled off the greatest marketing stunt in the history of humanity

The Australian Meat & Livestock board came up with a marketing idea. On Australia Day, which falls in the middle of Summer, it's very popular to have a family barbecue.

About 8 or 9 years ago, they came up with the idea that it was an Australian tradition to put lamb chops on the barbecue for Australia day. Now, I've been around for a few Australia days myself, and I can tell you it's never been a tradition at all.

But they got a popular former football player to start running ads (in a humorous manner) to say it was 'unAustralian' not to have Lamb Chops on the Barbecue for Australia day. The actual tagline is 'Don't be unAustralian, serve Lamb on Australia day'.

It has been a big success, and now they release pop singles on YouTube and generally create a 'big suspense' to see what they will do this year.

Overall, it's been a massive success, and in just a short time, if you arrive at an Australia day barbecue, it would be surprising to not find Lamp Chops sizzling away. In another decade, it will just be one of those societal norms that will require very little advertising to keep it going.

http://www.mla.com.au/Marketing-red-meat/Domestic-marketing/...

So, these types of stunts find success when the right pieces fall together. Definitely a lot to learn for the budding startup.

Unless I'm misremembering, I think there are lots of recently made up holidays that are basically just marketing ploys (Mother's Day and Father's Day).

Mothers' Day: 1870

Fathers' Day: 1972

Mother's Day in the US was originally conceived as a pacifist holiday for mothers to organize for disarmament.

Every holiday is made up.

Indeed. Even Christmas was controversial in early America because it was seen as a chiefly Catholic holiday that represented excess, decadence, and gluttony. Now it's the cornerstone of the entire retail industry.

And still represents excess, decadence, and gluttony.

You say that like its a bad thing. :-)

Eh, Christmas is basically just hijacked Winter Solstice. I would say that of all the holidays, the ones triggered by Astronomical events make the most sense since seasons have (or certainly had) very real importance to the cultures that celebrated them.

That is not to defend the actual traditions of Christmas though.

Summer/Winter Solstice?

Well, Australia Day isn't a made-up holiday -it's always been the 'National Day' (think 4th July). But it's just that the Meat + Livestock Board spotted a gap in the 'traditions' market and filled that gap in with some shrewd marketing.

Really? I've never really associated Australia Day with eating meat, but if we were going to organise something on that day a barbecue would be quite likely. But that's probably true of any day where we'd be organising a family gathering. It's certainly not like Christmas where you have to pre-order a turkey.

I do find it ironic though how barbecues are considered to be an Australian tradition. But then the most well known brand for barbecues, Weber is American.

Japan has this all over the place.

* What do you eat on Christmas Day? A (very specific style of) cake, and KFC.

* Valentines day is for girls to give guys chocolates. Guys give girls chocolates on White Day (March 12th)..

I think the best one is the temples - they sell what's known as a Shimekazari on new years (a kind of wreath). You have to destroy it and buy a new one each year, and it has to be a more expensive one than last years. Nice business if you can get it.

I thought White Day was the day when guys are coerced into giving girls a gift that is at least 3x the price of the chocolate bestowed upon him a month prior :P.

Guinness has successfully started "Arthur's Day" in Ireland, the 29th of September when you're supposed to have a drink of Guinness to celebrate Arthur Guinness' birthday. (It's not like they need it, Diageo (the company that make guinness) have 50% of the Irish alcholic beverage market, but shrug)

In Denmark we have J-dag, where the christmas Tuborg beer is released. Its always on a Friday and you can be 100% sure that every bar, in every city is filled to the brim with people drinking the first christmas Tuborg of the season.

> I swear, De Beers has probably pulled off the greatest marketing stunt in the history of humanity.

De Beers has the advantage of selling a luxury good. The point of buying a diamond is to demonstrate one's financial ability. People don't really want cheap diamonds.

I doubt their marketing campaign is a good pattern for normal products.

How about the iPhone? Many 'imitations' yet people who don't really know any better by the Apple product. "I don't want a fake" is very likely the reason.

In that case, though, the UI and details actually create a different user experience. As a professional software engineer, I like to think that I "know better" on various criteria.

I've used Android phones and while they are fine enough, the UI feels a little 'off' and the responsiveness is lower. It's enough to make a real, subjective difference.

The point is, most consumer buy without knowing any of that, or even trying the phone out.

I'm sure there's a lot of following the herd.

I like to think that I got an iPhone after carefully considering all the alternatives and making an informed technical analysis because I am a unique individual and I would never follow the herd or copy other peoples' actions. (At least that's what I tell myself.)

You think (based on nothing) that "most" consumers have never tried an iPhone?

You might want to think different (sic) about that for a moment, given that there are hundreds of millions of iOS devices out there in use right now.

Virtually everyone who can afford an iPhone either has one already, or has at least tried one out a bit.

YOu could try to claim 400M. But each quarter, half the sales are upgrades. So maybe, what, 100M? Which is 1/4 of America. But all the sales aren't America.

Maybe 25% market penetration? Not small potatoes, but still, Most people haven't bought one.

The trick is to turn a less luxurious good into a luxury good.

Which is rather like what they did.

Cars are an area where this is really common. BMW doesn't bring their lower end stuff into the US. Toyota created Lexus to be a luxury brand.

Or there's the pricier sorts of bottled water...

> Or there's the pricier sorts of bottled water...

Tell me about it. On my honeymoon in Maui I accidentally spent $9 on a bottle of water at Ferraro's.

It was "complementary" with an "e"...

Check out the Nike Air Force 1 High Premium iD Shoe. $200 a pair.

"It's a limited-time opportunity to create an inconceivably rare sneaker. Each month, Nike is releasing a new, exclusive material option for the Nike Air Force 1 High Premium iD. A limited number of pairs is available to customize each month, so get one while you can."

They've done this with their in-market shoes where they go for $200-$300 a pair depending on the makeup.

I'd say that $200 is approximately the right markup compared to the regular price of an Air Force considering what's required for individual customization. I do note that the price of a shoe may be high to begin with.

That being said, they've stepped it up beyond your example and gone with "Bespoke" options for their shoes. $800 a pair.

Or "super-premium" vodka. That's an entire product that didn't even exist until someone decided to create it, largely as a way for people to demonstrate to others that they're well-off enough to purchase super-premium vodka.

If you can get yourself into a "value through market position" opportunity early on, it seems like a license to print money.

There are even weirder examples of this in the alcohol market. Jeroboam and methuselah bottles of champagne are easily 200-400% more expensive than the equivalent amount of alcohol packaged in normal-sized bottles. I always found this amusing, like a tax on ostentatiousness.

In China, there's a version of PBR that costs $44 per bottle.

Lobster is exactly the same thing. Up until the mid-19th century, it was low class food - something only the very poor would eat. Now it's served with steak.

That's partly because they were overfished to near the point of extinction since they were so cheap (early last century a bucket of lobsters costs a dollar).

Their products are Veblen goods, economically speaking.

If you end up going with a diamond, you might consider a company like Brilliant Earth [1], which offers "conflict free" diamonds (and other gems), and recycled precious metals. Their gems come from mines that employ adults at reasonable wages. I'm not associated with the company, but they made my fiance's engagement ring and we're very happy with it.

[1] http://www.brilliantearth.com/conflict-free-diamonds/

Thank you for the link! I've been trying to find a decent source for conflict-free diamonds, and this seems to fit the bill. I hope I can convince my girlfriend to go with an alternative, but this is likely a battle that I will lose.

The issue centres around the social stigma of not having a diamond ring. Friends and family will ask what the stone is, and need to be educated. And no matter what you tell them, the perception will be that I was too cheap to buy her a real engagement ring. Nevermind the fact that I'm not actually saving any money, I'm just spending it somewhat more wisely.

It's actually a little bit of a stressful situation for me. I'm in the Royal Canadian Mint's MintChip Challenge, and I'm hoping to win some gold from the competition, so I can melt it down and make an engagement ring for her from that. In my eyes, that has more meaning behind it. Moreover, she's going on a trip with her sister to Prague & Rome in a month, a few days before our 7 year anniversary. Since she knows a proposal is coming, I was hoping to surprise her by showing up in Rome and proposing to her there. May not be the wisest way to spend my money, especially when I'm not exactly swimming in cash right now, but I felt it would be worth it for the memory and moment. To me, that's a better use for my money than some artificially-valued diamond. Seems like I'll have to scrap that plan and save more money for the ring she wants.

Went through the same thing with my wife. In the end I caved and just bought the best damn diamond I could find after 3 months of searching. Easier to explain why you bought an alternative stone than why you bought a shitty diamond.

You could do the economist thing and try to phrase it in terms of opportunity cost. That is, by insisting on a diamond, she's giving up a moissanite stone that's 5 times the size; by insisting on an uncultured diamond she's giving up a diamond that's twice the size (and more pure to boot).

Speaking as a girl without even the least bit of interest in diamonds, "If you give up the thing you want, you can get a thing you don't want that's TWICE AS BIG" is just in no way a selling point, especially as long as her association with those stones is that they're fakes. You can try to make the moissanite seem cooler, or the lab diamond more ethical, but women are already aware that if you buy "fake" jewelry, you can get bigger stones, and generally that's just seen as trashy.

This is the intersection between Macro economic theories (op cost) and consumer behavior. And that too, one of the most emotionally charged decisions people make in their life times - marriage.

I would be extremely hesitant about using that particular gambit.

"This is the intersection between Macro economic theories (op cost) and consumer behavior."

This is as Micro as it gets. And why do you think oppurtunity cost is restricted to Macro?

Real people do not behave as the homo-economicus of economics papers would have you believe. Especially when it comes to life-altering choices and the signs and symbols associated with them.

Short version: do not do this, for it will rebound on you horribly.

I've been trying to find a decent source for conflict-free diamonds

You can request Canadian diamonds at the jewelry store. My store had to overnight a collection in for us to look at, but it wasn't an issue for either of us.

Canada's diamond mines have labor and environmental standards to abide by and Canadian diamonds are laser inscribed with a goose logo and come with an extra certification being from Canada. De Beers does own 2 out of the 6 mines in Canada, but it does not have anything near a monopoly there.

Sounds like a good way to show off. "Oh look you have a diamond ring too? Did it come from one of those sweatshop mines where children have to work? No? Oh that's a shame. Mine came from an ethical mine".

My wife and I got our wedding rings here (we also have the luxury of living in the Bay Area, so we got to meet with them in person). They also have a truly astonishing array of vintage rings with stunning stones and settings. If your fiancé(e) is into that style, they have the added benefit of being both glamourous and unusually inexpensive for the quality (and it’s definitely not a “fake”)!

Congrats on presenting a diamond-alternative to her. The diamond trade is absolutely disgusting and unfortunately many people seem to equate "love" with a shiny rock. If it came down to it, I would have to reevaluate marrying someone that refused to believe otherwise.

I started thinking about this issue a few days ago and have yet to come up with a strategy for convincing a (future) partner on the follies of purchasing a diamond. Is there any recourse at all to the epic marketing job De Beers has masterminded?

Good luck. It's akin to convincing your SO that you don't want to celebrate Christmas because it's a product of retail marketing.

Oh, did I mention that our family hasn't bought one another gifts on Christmas ever sine I was about 12 years old? :)

Maybe there is hope after all! (not)

How about sending them this article?

Find someone who can think logically. Not easy, of course...

1) Make jokes about diamonds being bad long before there's thought of engagement rings. Get your friends, hopefully her friends, and ideally her to do the same.

2) Make it clear that your objection is not to financial. If you do go with a gem that proves to be less expensive, donate the balance to a cause she believes in. If you do have financial objections, express them separately, in financial terms; don't conflate the issues.

3) Point out that it is not a long-standing tradition, but rather a recently manufactured one.

4) Don't skimp on other traditions.

My SO has agreed to being given a kitten as an engagement gift. I think it works great as a replacement. Not cheap (food, needles, etc), not short-term, and cute. She'll probably enjoy it more than the 30 aggregate minutes of showing off a ring, too.

Artificial diamonds are solid, physical proof of the achievement of mankind. We've taken the most regular, durable objects that nature can produce and we've duplicated and bettered them. Every time you look at an artificial diamond, that's science, right there, concentrated and almost literally crystallized.

That's great if you're marrying a woman who is a scientist. Everyone else will just roll their eyes, unfortunately.

Find someone who's not into that whole thing. Not everyone is the same. There are highly ethical people, vegans, "occupy" people, hairy feminists, eco-warriors, punks, goths, nerds, socialists, anarchists. There are loads of people who will pride themselves on not having a diamond. There are people who don't fit in these common moulds.

Of all the groups of people you listed, it's interesting that only feminists are described with an adjective (and 'hairy' at that).

Hehe, I suppose I was trying to allude to more extreme feminist leaning people.

(Pedantically, I could claim we are all feminists, after all, nearly everyone here thinks women should be able to vote. But that wasn't the meaning I had in mind initally)

Pedantically? Pedantically, feminism encompasses much more than the right to vote, which is why not all people are feminists. Having the right to vote would be suffragism. :)

The diamond trade is absolutely disgusting

I am not sure that the people of Botswana would agree.

> "I don't want something fake!"

Symbolizing the triumph of technology and human progress is not really the ideal for an engagement ring, but it's a lot better than symbolizing blood and oppression (depending, I suppose, on your views on marriage, but given that you were looking at engagement rings I expect yours are favorable...)

My wife has a lab-grown emerald from GreenKarat (http://greenkarat.com) on her finger, and she's very happy with it. She was even more opposed to diamonds than I was, going in (I think they look nice, just not worth the money or ethics, she doesn't like the look either). But yeah, for the record, "That's what everyone gets" is off by at least one!

If her heart is really set on the diamond, the best option is a ring in your family or hers, if one exists. Failing that, vintage rings you can find at estate sales and the like may be a more ethical approach than buying new diamonds. They'll have a bloody history but at least you're not adding to demand that will spur new bloodshed. "Ethical" diamonds sold presently in jewelry stores, per my understanding, are better than they were 10 years ago, but the Kimberley Process still has issues.

I actually had this argument as well recently. She however did agree with me and is now sporting a Sapphire engagement ring. It does have some diamonds on it but the main stone in Sapphire. She wanted it because she didn't want what everyone else had.

Not sure how old you are, but I have also noticed this trend in Gen Y (friends like myself) starting to get colored gemstones. Of course this is totally anecdotal but maybe De Beers stranglehold is finally going away?

Congratulations as well by the way.

I haven’t noticed such a trend, but it would be welcome. Never liked the look of diamonds, myself, so I always figured if I got engaged I’d just look for the gemstone that’s right for my partner—their look, their personality.

As I said purely anecdotal, but it does seem to be a trend in my circle of friends.

BTW you will have little to no say in the process. Just go with whatever she requests it will make your life easier.

The fact that you (and probably she) are presuming that a stone is required in the first place means that DeBeers has won the larger victory.

I don’t; jewelry is just nice.

Sapphires are actually even more bizarre. They can be produced artifically, at perfect quality and any size, relatively cheaply. The only way to distinguish natural ones is by their impurities. The artificial ones are literally a superior product in every way, yet are considered "fake" and thus disgraceful to wear.

If one of my friends were to hold up a loupe to my wife's ring and say, let's see how much you paid for this, James, I would probably just save them the trouble and let them know they were dead to me already. That's the funny thing about this. You can't even tell with your bare eyes whether it is the real product or not (diamonds too). The only person who can know is the person buying it and anyone they tell.

So I presented the sapphire option to my girlfriend. She was hesitant at first because she wasn't sure what it would look like on her hand. After scouring Toronto, I found the Fair Trade Jewellery Co. (http://ftjco.com/). I'm linking to them because they are fantastic.

They stayed open past their normal hours so that my girlfriend and I could make it down. They sourced 3 purple sapphires for us so she could see, and 1 of which was absolutely gorgeous. My girlfriend loved it, and it's what I ended up going with. Putting a payment down next week.

But the best part appeals to the nerd and engineer in me. They do bespoke rings, fully in-house. They will customize the ring to any design you want, to fit your finger and the gem. That way, it's not only designed the way you want, it's made to uniquely fit you.

They design everything in CAD, and iterate with you via e-mail. Then they print it on their 3D printer, where you have a chance to go in, see it in person on your finger and with the gem. If changes are needed, they can iterate again. Otherwise, they go ahead and make a plaster mold. Then they melt the metal (i.e. gold, platinum) and cast it. They have all the equipment for this in-house in the back of their store. Honestly, I haven't been more excited about buying a ring than now. I'm super happy I found them.

My fiancee and I did tattoos instead. We came up with a design that we both got in the same place and can be filled in and completed when we get married. The best part is, we are the only two people who had to suffer and shed blood for it.

Ooh, nice. To the extent that an engagement ring says "I'm willing to make a sacrifice to prove that I'm serious about you" a tattoo totally works.

I was lucky, my fiancee is dead keen on Moissanite. She likes the idea that its a "meterorite stone" (even though the ones you can actually buy are industrially grown).

I could not bring myself to spend my full budget on a stone, regardless of the dreams of my then fiancee. Instead I split the budget between the ring and flying her overseas for a while to propose. She got something she still stares at on her hand, and we both had a memorable trip and event that we won't ever forget.

Not sure if the "gold is made of stars, diamonds are from coal" line will convince her. https://www.npr.org/templates/story/story.php?storyId=739720...

I give major props to my now wife being OK with the gold engagement ring I bought out of principle. It had a fanciful cheesy design too. :)

Good luck!

She even told you her true requirement, which is to look good for her girlfriends. (Watch what happens when ladies announce an engagement or look for the ring shot on Facebook, then tell me I'm off base.)

You did not sell her a product which would make her the envy of her girlfriends. "Cheaper than their rings" is the opposite of a victory condition. Don't sell cheap. Sell authentic, sell natural, sell one-of-a-kind, sell meaning, sell status, sell a story, etc.

P.S. If you understand the thing she is trying to buy, you don't have to sell her a ring at all.

There turns out to be an arbitrage opportunity in social status for, say, middle or upper-middle class Japanese women. Anybody can buy rocks, but nobody can buy a man vacation, so a man who demonstrates ability to take long vacations must be able to buy virtually unlimited amounts of rocks. Regardless of whether I can afford rocks, I can afford long vacations quite easily, so we announced a small rock and a long honeymoon on the same day.

It's absolutely unreal how effective that was. All relevant stakeholders believe I'm unreasonably well-off. Ironically, this caused them to sharply upgrade their estimations of what the (quite modest) ring must be worth.

What's a long vacation? 6 months in Male, Maldives?

For the modern professional, 1 month would be long.

Excepting modern professionals in various European countries where 1 month is pretty standard.

Brilliant example. There's another social signal that's relevant across cultures regarding wedding rings: the design of the setting. The complexity and attractiveness of how the stones are set is what people notice, above and beyond the stones themselves. (The only thing people tend to notice about the stones is the size and quantity.)

My wife wears a moissanite ring, which she loves. The deciding factor was that we could afford a unique custom-designed setting if we went with moissanite. The same ring with diamonds would have been more expensive by at least a factor of ten.

My wife worked in high-end bridal in NYC for a few years, and rings were always a topic of conversation. The amount of times prospects noticed the stones in her ring were moissanite: zero. The setting sends a stronger signal, and it's less expensive. To echo patio, people who saw the ring assumed I was unreasonably well off, when the true total price was less than the latest MacBook.

Paying up for "perfect" diamonds is a complete waste of money from a signaling standpoint. Spend on the setting and design, not the stones.

Unfortunately, if you do ever want to sell, the setting is essentially worthless. Almost all of the cost of the setting is in the labor, and, as the article explains, those who buy "used" jewelry are almost certainly going to part it out and melt it down. (That is, unless you're talking about really high end estate jewelery.) So, for the $3-10k you'll spend for a nice setting, you'll probably get back 20-50% of the price of the stones, and maybe 60-80% of the spot value of whatever metal you choose, which again, is far, far less than the cost of the setting.

This isn't to say that you're not right on from a signaling standpoint, just that if you think you might have the need to resell the ring in the future (or perhaps borrow against it), you're better off getting a better stone than a fancier setting.

Do engagement rings have a large resale value anyway? This is a whole article about the marketing push for diamonds. I can't imagine what "second hand ring" would say....

That's sort of the point. The ring itself is only really worth whatever the metal weighs because nobody wants a "used" ring. So if you sell the ring to a jeweler, he is almost certain to melt it down and recast it. Whatever you paid for the craftsmanship/design of the ring is literally melted away.

The stone is another story. It's very easy to resell/reuse good stones, although as the article indicates, the value you'll be able to recoup isn't exactly great.

Yes that's true, but I'd presume a lot of what you pay for in a diamond ring initially is not the cost of raw materials, but the symolism, and hence a diamond ring would lose value.

I was thinking you'd lose money either way if you went with diamond vs. non-diamond, so "you'll lose value" is not a compelling argument for non-diamond.

Everything about a wedding is front-loaded to an exreme. From photos, to flowers, to cars - when it's a wedding the price is loaded. It's a complete rort, everyone knows it is going on, yet - there it is, everyone just pays up. Because nobody wants to be seen to be cheap.

> Don't sell cheap. Sell authentic, sell natural, sell one-of-a-kind, sell meaning, sell status, sell a story, etc.

Basically: sell it better than De Beers has been doing for over half a century.

i.e. best of luck!

DeBeers advantages: they do this for a living, and they've got a wee bit of a marketing edge on you.

Your advantages: you actually know the girl, you apparently know what makes her tick well enough to make her fall in love with you, you know everyone in her Circle of Girlfriends reference set (or would if you cared to), you're not a sclerotic megacorp, you've got copious permission marketing assets to her and her CoGs, and you've actually got a soul, which should count for something.

Besides, this is HN. Scrappy startup versus megacorp which hasn't innovated since the first world war? Oooooh, bring it, this should be fun.

> Don't sell cheap. Sell authentic, sell natural, sell one-of-a-kind, sell meaning, sell status, sell a story, etc.

I have been thinking recently of an anniversary gift that would represent my personality. I'd like to get a ring of iridium. It's one of the most noble metals (platinum group), being the most corrosion resistant of all. It's very lustrous, with a dark gray color. It's very hard, thus scratch resistant. And it comes from SPACE!

Patio is damn right on looking good to the women's circle of friends. People are behaving rationally here - they understand the engagement ring as a part of the cost of doing business/participating in a social ritual, in the same vein as taking your husband's last name, buying certain kinds of houses, etc.

If you have some time, you can go to Brazil (eg state of Bahia, near Chapada Diamantina where many diamonds are found), talk to people in the villages (Spanish works, Portuguese is better) and buy a raw diamond they found.

Polishing will make it smaller by about half, and at least I cannot judge the purity and value of a raw diamond just like that, but the story and experience of getting it and the knowledge of its ethical origin are enough of offset that in my opinion.

edit: If anyone needs directions, just ask.

You should think twice before you marry...

Stick with your guns. Why would you buy a diamond when you're so opposed to it for perfectly valid (although potentially subjective) reasons? Does the perception of other people that you are "too poor to afford a real ring" matter to you so much?

My wife was appalled when I told her I refused to buy her a diamond engagement ring. "Why wouldn't you want to give me a diamond ring? I couldn't marry someone who wouldn't give me a diamond ring."

We're married now and she doesn't even wear the sapphire ring that I bought for her because of chores, etc. Sure, she had to explain to almost everyone why it wasn't a diamond ring but that just means that she had one more topic to go through with her friends.

The only person's opinion that matters to me is my girlfriend's, and then my own. I really don't care what others think. I prefer to buck the trend and be non-conformant.

However, I have to take my girlfriend's feelings into account. I have to buy the ring, but she's the one that has to wear it. If she has ill-feelings towards the ring when she wears it, she'll hate it. I'm not saying that's what'll happen, I'm just saying I need to take her wants and needs into account. Simply making a decision for her because "I know what's best." is selfish.

Anyway, I'm slowly whittling her down. She just told me she may be interested in a sapphire ring.

> De Beers has probably pulled off the greatest marketing stunt in the history of humanity. The fact that it's so ingrained in our minds, to the point where a smart, educated, and informed person like my girlfriend still wants a diamond even after knowing all the issues with them, is fascinating.

Does she still want the diamond after being shown the article? Most people don't like being manipulated.

I sent it to her, and it's a long article. I'm hoping she reads most of it.

We went out for coffee after shopping. She knows I'm right about diamonds. Her issue is a) she has difficulty listening to me about these things because she's stubborn and feels like I'm manipulating her b) she doesn't want to buck the trend, be different, and have to explain things to her friends and family.

She hates being different, and she hates being the centre of attention. She feels that by not getting a diamond engagement ring, others will speak ill of her behind her back, and she doesn't want to stand out like that.

I'm the opposite. I could care less what others think. I don't love being the centre of attention, but I don't mind it. I hate being conformant though.

Anyway, it's not criticism of her. I love her dearly, I just need her to see the light.

Anyway, it's not criticism of her. I love her dearly, I just need her to see the light.

It kind of sounds like criticism of her. And it reads like you love her conditionally.

And you "need her to see the light", is that true? What happens if she doesn't come around to your point of view?

Might it help to point out that both Princess Di and Kate Middleton got sapphires?

I think she'd be pleasantly surprised to hear how much of a non-issue it has been among friends, family, and acquiantances that me and my (also female) fiancee don't wear any engagement ring at all (our ruby and sapphire rings are both waiting to be resized).

That said, the point of a gift is to give something the recipient would enjoy -- not something you would want yourself. So, if it really makes a difference to her or her family, I'd recommend getting a diamond, even if it sets back your plans for a house, etc (I hope she understands that!!)

If it's not a diamond, not matter what you call it people are going to think QVC and Diamonique.

It's not rational, and these stones might be nicer, but they're not diamonds. Branding, there.

> I can't believe this article popped up on HN's front page tonight.

This article was actually already posted somewhere in the comments a couple of days ago: http://news.ycombinator.com/item?id=4523063

Here's my 2 cents on the start up industry, devs are still undervalued. I'm hearing a good dev can command $125k-$150k/year + the hope of an exit, I think that's cute. Lawyers with less value command salaries $250k to $500k.

What made De Beers and the diamond industry was with cartels and marketing. I think devs inherently lack both those features being independent thinkers and gasp introverted. Let's change that.

You want to change developers being independant thinkers?

Developers lack the "feature" of cartels?

This comment makes no sense and appears to me to be a poorly concealed attempt to wedge an unnecessary argument into this discussion.

I read a similar article right before I married my wife. Trust me when I say it's a losing battle trying to rationalize how we've been duped by marketing. You'd have to convince both her and her social network... Good luck with that.

Buy her the moissanite and deBeer stock worth the price difference. It is just as pretty, shows your financial prowess and will pay for a year of your future childrens college.

"That's what everyone gets" sums it up.

If a person is content to get something "what everyone gets", they are good to be defrauded while supporting labor violations in some third word country. Accepting "what everyone gets" is a real no-go, it's a surefire way to measure a person up. "Too light".

Me and my wife, we got outselves a pair of titanium rings for the wedding. They look downright alien, everybody asks about them on sight. But all those opportinities are lost to you once you accept "what everyone gets"

My girlfriend wants a Winnebago type thing instead of a diamond, presumably so she can go somewhere if I become especially annoying. ;)

I recently purchased a diamond engagement ring for my fiance. That shopping experience perfectly encapsulated everything there is that I could possibly hate about making a consumer purchase:

1)Product is monopolistic, with supply artificially constrained in order to generate prices that reflect that. Actual value of say, a one carat diamond, is probably a few hundred bucks max.

2)Cultural demand was artificially crafted by a sustained (admittedly brilliant) marketing campaign by the monopolistic entity years ago. It is now ingrained into the core of our culture. Annoying to think that it didn't exist at the beginning of the previous century and that its arrival was not organic.

3)I cannot realistically educate myself on the product in any meaningful sense like I can with a TV or a car. Yes, I visited many jewelers. They all were quite happy to educate me on how diamonds are graded. I read up on my 'Four C's". I peered into the jewelers lens and nodded as I saw the slight imperfections of one stone vs another. But you know what? At the end of the day, there is NO WAY I could accurately grade them, even after all of my research and hands on 'training'. Is that diamond a VS3 or WS1? No idea, but one is far more expensive even though they look the same under the scope. It would probably take me years to be able to identify why.

4)Blood diamonds. People are being enslaved, murdered, and abused in order get these stones to me. Not to mention other horrible labor abuses, and the guns that those diamonds go to fund that wreak havoc in the origin communities. Honestly, there is no way to tell a stone's history, especially when you are dealing with a cartel. You can't exactly ask for proof, and anything they tell/show you...can you really trust the authenticity?

So. Anyway. Yeah. I mitigated the 4th point by buying a lab grown diamond. (Not much cheaper than mined diamonds btw if you are wondering).

Don't get me wrong, -I was happy to give my fiance something that made her so happy. One of the hilarious premises we all learned when we took our first Econ class was that in order to make those simple models work, we assumed consumers were rational. We all know how true this isn't. This purchase exemplifies that for me. I'm acutely aware of how irrational I personally find it, while being simultaneously aware that I have no problem setting that aside in this (somewhat rare for me) instance. I am infinitely more rational with purchases I make for myself than for those I love. That last sentence is where a lot of margin lies for a LOT of products.

Ha, the rationality thing is so true - just finished reading 23 things they don't tell you about the free market - it covers just this.

Did you mean 23 Things They Don't Tell You About Capitalism by Ha-Joon Chang? That's what I find searching for your title.

http://www.amazon.com/Things-They-Dont-About-Capitalism/dp/1...

Consumers are rational in the purchase of diamonds - their purchases are based on buying the diamond that shows the largest amount of wealth for the given stone.

Irrational would be paying more money for a smaller diamond.

Responding to social norms creating by a marketing campaign is many things - strange, definitely - but it's not irrational.

#3: It takes you roughly six months to get decent at it. If you're willing to spend a solid week with somebody who can show you what to look for, you'll be able to take decent guesses.

And with about 15 minutes of reading you'd know there's no WS1. Or VS3. At least not according to the GIA scale, which is the most common in Northern America. VS3 is a marketing term to make an SI1 sound better. I'd assume WS1 is really VVS1 - and I guarantee you'll be able to spot the difference between a VVS1 and an SI1.

(Sorry, I happen to live with somebody who's a certified gemologist. I assume I have been affected by gem nerdery via Osmosis ;)

>And with about 15 minutes of reading you'd know there's no WS1. Or VS3. At least not according to the GIA scale, which is the most common in Northern America. VS3 is a marketing term to make an SI1 sound better. I'd assume WS1 is really VVS1

I did far, far, far more than 15 minutes of reading. I think this just underscores my point ;)

While I was able to easily identify higher quality stones compared to others under the lens, I was wholly unable to rate them other than comparatively to each other. Unfortunately for consumers of these products, we don't have access to 6 months of time and a slew of 'practice diamonds' to check out.

I wonder what the variance in ratings for a typical gem is if you were to have it independently appraised many times over?

The Wikipedia page on Diamond Clarity points out the possible grades :) (http://en.wikipedia.org/wiki/Diamond_clarity)

But even if it didn't: Yes, doing some things requires specific training. The same is true for any kind of appraisal system. You won't be able to judge antiques with 15 minutes training, either. Or paintings. Or even something as common as cars.

As for the rating, diamonds are usually rated comparatively, so you had the right approach. If you're a professional diamond grader, you often have a set of reference diamonds. (Yes, that's kind of hard to come by. But diamond grading is hardly the only job that requires specific tools)

The variance should be very low. Part of the certification process from GIA is that you grade a bunch of stones, and you better get it right, or no cert for you. Yes, you can occasionally squabble over a stone that's right on the borderline between two grades.

I had almost the same conversation with my fiancee. Fast forward nine months, she loves her moissanite ring. I think what changed her mind was actually seeing a moissanite — it is very obviously not "fake," and the stone's fire is amazing.

Incidentally, rather than pitch it as "the ones you buy are created in a lab and are cheap," I'd go for something more along the lines of "they grow them through a natural process, kinda like pearls." It's not scientific, but it's true enough.

This Atlantic article is 30 years old (and still relevant -- props for that).

Here's a related one from yesterday:

http://www.theatlantic.com/health/archive/2012/09/study-soci...

“What behavioral psychology reveals about your online photos: Comments and approval from other users end up being more important than the way you look.”

It's the same phenomenon both times -- social proof. It's the same reason you're more attractive in a club if you appear to be getting approval from other attractive people. The same reason the original PageRank algorithm did a good job of surfacing web pages people wanted to see.

There are two ways to avoid cartel diamonds. The first you probably know about, namely, man made diamonds, but I've got a hunch her "fake" complaint might apply here too.

The second is "Polar Diamonds" from Canada. They are the only source of natural diamonds that I know about that isn't controlled by the cartel.

It's a fascinating piece, for a number of reasons. The first, and perhaps most interesting, is that the story behind the De Beers cartel is well known. Perhaps not in this depth, but still, it's no secret. Pretty much everyone knows they exercise a monopoly on diamond production and distribution, artificially keeping prices high. And yet, nobody takes the red pill and opts out of the illusion. Call it the power of the diamond industry's marketing. Call it adherence to tradition (created by the diamond industry's marketing). Call it what you will. But it's a powerful force. Consumers know it's a lie, and they choose to live the lie.

Second: a major prediction made in this article did come to pass, but it didn't have the predicted effect on diamond pricing. A serious contender to De Beers emerged in the early 2000s in the form of a multinational, "breakaway" cartel. Yet, both cartels -- and all other minor, independent players in the market -- seem to be acting in concert to keep supplies artificially low, and prices artificially high. In fact, the rate of price increase is at its highest in modern history. Economics tells us that this shouldn't be the case, especially given the emergence of new market entrants. And yet, the rate of price increase took off at precisely the same moment as the entrance of the new competitors. (Source: http://www.ajediam.com/investing_diamonds_investment.html)

What could be causing a major, year-over-year price increase in the face of new competition? Well, one guess would be that the two cartels are colluding in some way. Perhaps they've made an arrangement to fix prices or production. Or perhaps they've carved up the map, and reached some sort of non-competition agreement in each other's territories. Perhaps both. Ordinarily I'd call these ideas paranoid. But the history of the diamond business tells me that we can't put it past these guys.

the story behind the De Beers cartel is well known.

Is it really? Or are you assuming that because you and your friends know about it that you think that everyone knows about it? (not an attack, just a easy trap to fall into).

players in the market -- seem to be acting in concert

I think that whenever a new participant enters the market they find that the most profitable path is to collude with the existing cartels. After all, if diamonds are really worth nothing, why would you enter the market unless you planned to keep the status quo?

What could be causing a major, year-over-year price increase in the face of new competition

I seem to remember reading somewhere that the growing affluence of Asian markets was increasing demand. But that might be the marketing spin.

edit: added everything under "or are you assuming" sentence.

It's really well known. There are articles written up about it every few years. It gets the occasional pop culture shout out.

We could split hairs for awhile and debate about how well known it is, or whether "Joe Sixpack" in Des Moines knows about it. But it's far from obscure.

I'll grant you that a lot of the major demand drivers (young couples, new money, etc.) probably don't know, or at least don't care. And that might make all the difference.

EDIT: Seems we both edited our posts at the same time. I think the Asian theory is interesting, and it might be the most savory / least fishy driver of price increases. Perhaps the "Joe Sixpack" of Shanghai, newly monied and with very few reasonable investment options in his home country, is buying diamonds left and right. Wouldn't surprise me. Either way, it seems odd that the cartels wouldn't go head to head in Asia for the big prize here, unless they reached a gentleman's agreement on territories.

EDIT: Seems we both edited our posts at the same time

An edit-off at 10 paces. Draw!

I think the whole thing is fascinating. From a marketing perspective it's amazing how De Beers manufactured demand for diamonds out of near nothingness.

it seems odd that the cartels wouldn't go head to head

This is an example of mutually assured destruction at play. The big players can't go head-to-head selling what is essentially a commodity good, without price cutting which would eventually lead to diamonds being sold for their true value. None of the players are interested in that.

> I think that whenever a new participant enters the market they find that the most profitable path is to collude with the existing cartels. After all, if diamonds are really worth nothing, why would you enter the market unless you planned to keep the status quo?

Also, DeBeers has diamonds and cash enough to sell below your cost of pulling things out of the ground for a lot longer than you can stay solvent.

I agree with you in that the story of De Beers is pretty well known. But - for reasons outlined in the article - the intrinsic linking of diamonds to the act of romance and marriage is well embedded in society. So even if people know it is essentially meaningless (in the true sense of rarity) as far as society goes, they have a social status.

Any society is full of irrational practices and purchases. Throwing rice at a wedding? What's that about? $5 cards to wish someone well? What on earth? Yet these are all accepted by society as societal norms, and even when the companies have conspired to create them (or at least magnify their importance) it is what it is. In a form of social proof, nobody wants to be the first to break with the tradition, which is how most tradition stays. Same goes for Christmas - which is nominally a Christian religious festival, but, at least in the USA, widely adopted by people of all religious and aetheist beliefs. Because nobody wants to be the grouch who doesn't hand out presents.

Interestingly the article mentions the introduction of Argyle diamonds - a friend of mine, while travelling in remote WA bought a large diamond at a fraction of the retail cost, direct from either the mine itself or a local retailer. He kept this for 15 years, which was the time period between purchase and eventually finding someone to marry (and getting it put into a ring).

But as to why the introduction of new sources hasn't drastically affected prices, I think that any new cartel or operator entering the market is just as likely to free-ride the hard work of De Beers. If De Beers spends significant money and influence maintaining a monopoly, and therefore creating monopoly pricing, any new entrant rationally would be well served to restrict supply so that they can free-ride on the monopoly prices without any of the costs of maintaining the monopoly.

"But as to why the introduction of new sources hasn't drastically affected prices, I think that any new cartel or operator entering the market is just as likely to free-ride the hard work of De Beers. If De Beers spends significant money and influence maintaining a monopoly, and therefore creating monopoly pricing, any new entrant rationally would be well served to restrict supply so that they can free-ride on the monopoly prices without any of the costs of maintaining the monopoly."

Perhaps, but it's extremely hard (and not very lucrative) to follow the leader when the leader exercises such dramatic buyer and seller power in a marketplace -- unless you plan to compete on price, or to compete by tapping an entirely different market segment. Perhaps prices are much lower in certain markets, but if that were the case, we probably would have heard about the arbitrage opportunities by now, and commodities traders would have closed that gap in a heartbeat.

The different-segment theory is interesting, but it seems very hard to fathom without some sort of non-compete arrangement in place -- be it in X or Y geography, or for Z consumer segment, etc.

My best guess is that this is a two-sided story. There's a major demand factor involved (perhaps in Asia), coupled with the likelihood that the two cartels aren't directly competing. B has to go along with A if there's a price increase, because we know that the supply isn't actually low. There are enough diamonds to keep up with surging demand.

Well, we don't know what the cost-structure of the other market entrants are. Perhaps they have a much higher cost structure than De Beers, and thus there is no point in starting a price war as it not only destroys the long-term market for the gems, but the newer entrants might get wiped out.

I think Game Theory is the right way to look at this - who really gains from a drop in prices? Sure, the new consumer wins - but at the cost of destroying a societal norm. The new entrant might gain short-term profits but at the expense of their long term market and possibly their very existence.

The opportunities for diamond arbitrage are very small, both because there aren't large organised exchanges (no diamond futures contract I'm aware of) and because the retail market is controlled by the suppliers, removing the possibility of 'black market' arbitrage.

Many, many companies would love to exert control over their market in the same way. I just think that new entrants want a piece of the monopoly pie rather than disrupting the entire industry.

Another possibility is that I'm reversing cause and effect here. Perhaps demand started soaring first, which inspired the entrance of the new player, who quickly shored up the gap in demand -- thereby restoring supply/demand equilibrium to the market, and keeping prices stable. Not out of the realm of possibility.

In such a scenario, De Beers wouldn't necessarily or aggressively chase the second player into the new market. It's doing just fine in its existing markets, and it doesn't want to risk setting off a price war over the new market.

Sadly, it is almost unheard of here in Japan and I am 99.999% sure it is the same in most of Asia (the real market for diamonds and luxury brands nowadays).

Just a couple weeks ago I was at lunch with my Japanese coworkers and the conversation topic went to one of them thinking on whether to buy a diamond ring to his wife as an anniversary gift.

I told him to better stay away from diamonds, and mentioned the diamond situation (pretty much the contents of the article) and not only not any of them had ever heard about it (despite most of them having graduated from top public and private Japanese universities), but also I ended up getting from all of them the most incredulous and distrustful looks I had ever been given in all my years in Japan.

A fundamentalist vegan urging them to immediately abandon sushi and seek redemption in the purity of soy beans would had been more warmly welcomed to discussion than my comment.

well... it does take awhile for foreign countries to adopt white man's guilt or more broadly music in general. I hear most Europeans/South Americans have not heard of Gangnam Style, I bet there will be a second wave in a month from our Euro/Latin friends.

Free markets always tend towards monopoly/oligopoly/cartel structures in the long term - because the firms that do so retain their pricing advantage (profits) and the firms that don't - die.

I have to think that the idea of free/natural markets has to be one of the greatest tricks ever pulled by anyone at any time (next to communism). Markets are artificial and restrictive for a reason - they're created by governments for the benefit of the populace - they are probably the most unnatural constructions ever created in human history (next to the corporation/government).

It is in the interests of market participants to maximise profits (to survive/grow). Efficient markets are the enemy of profits. Hence, market participants will make markets less efficient as a function of their incentives - if they can. It may seem more efficient in the short term - i.e. price wars - but in the long term - after the field is cleared - prices always rise in some form or another.

Free/natural markets are probably one of the greatest lies ever sold.

> Free markets always tend towards monopoly/oligopoly/cartel structures in the long term - because the firms that do so retain their pricing advantage (profits) and the firms that don't - die.

This might be true, but short term profits are still attractive to people who want to disrupt the industry. If I discovered a significant diamond mine in my backyard, I'd undercut the inflated prices of the current cartel before attracting attention from the big boys. [1] The only way to disrupt the diamond market is to invent a replacement product that is accepted by all females/males that want diamonds.

[1]every single startup on HN that is "disruptive" and pining to be acquired

I completely agree. But you'll become the next De Beers eventually - if you want to survive.

"You either die a hero or live long enough to see yourself become the villain."

-- Batman

> Free markets always tend towards monopoly/oligopoly/cartel structures in the long term - because the firms that do so retain their pricing advantage (profits) and the firms that don't - die.

Can you give any example?

> Free/natural markets are probably one of the greatest lies ever sold.

What do you mean? Free markets are not a lie. There are tons of free markets. If I buy bread at the supermarket, I can choose among multiple brands.

Any industry that makes money will tend towards this in one form or another. This does not mean that there are no competitors or independents not making money - it merely means the vast majority of the market is consumed by a few companies/brands who set the prices and keep price floors.

Bread is an example of a cartel structure reinforced with marketing, economies of scale (monopoly) and previous consumer buy in. You can choose from multiple brands - but you'll notice the price of bread isn't falling very quickly - it's an implicit pricing pact - you can undercut your competitors - but not for long, and definitely not forever.

Oh, I see you're using a definition of Cartel that's rather different than the standard one[1]. If you just mean that commodity producers more or less converging around a price without an explicit agreement between them to inflate that price than of course every commodity ends up being a "cartel" and you'd have a hard time finding an economist who would disagree with you.

[1]http://en.wikipedia.org/wiki/Cartel

I think you've got this wrong. Any firm that defects from the cartel will tend to gain market share at the expense of all the firms that remain in the cartel. Thus, its really the firms in that remain in the cartel that die. So the whole thing looks a lot like a Prisoner's Dilemma game played between the firms looking to cartelize.

Now, they might do things like sign contracts between each other to prevent defection, or buy each other's stock to make defection less profitable than profitable than playing along, but then you have to worry about disruption from outside the cartel. Or you could forcibly cartelize industries like FDR tried to do with the National Recovery Administration if the government really wants an industry to be profitable when it wouldn't otherwise be.

And when I think of successful cartels in history I think of DeBeers and OPEC and... well, those are the only two I could name that lasted longer than a few years.

Any defecting firm will also lose a great deal even with the market share gain - hence why there were so few long term winners after the dot com boom. You'll notice that a lot of the firms that did this have survived and raised prices above inflation utilizing monopoly power - just like I stated above.

> And when I think of successful cartels in history I think of DeBeers and OPEC and... well, those are the only two I could name that lasted longer than a few years.

Another would be drug cartels. They keep prices artificially high so that everyone gets a share of the profits. But cartels in general always have players that "cheat" by independently lowering/raising the price. If a player is caught cheating, the cartel usually punishes the rogue player by excluding them from future pricing meetings and use their market share to kill the player both figuratively and literally when drugs are involved.

Nah, the problem with drug cartels is that they aren't cartels, as can be seen by the body count they're racking up against each other south of the border. They aren't cartels at all in the economic sense of the term, but rather firms competing against each other.

The term "cartel" arguably did apply up until around the death of Pablo Escobar, and the subsequent usurpation of power from the Colombian producers by the Mexican distributors. For the most part, the drug trade really was a single, multinational, price-fixing monopoly (or at least a cooperative oligopoly) under Pablo's reign.

[I'm not trying to give the guy any credit or praise for his actions, though.]

3 Days ago Rohin (http://news.ycombinator.com/submitted?id=rohin) the co-founder of Pricenomics posted the article: "We Need a Warby Parker for Mattresses" (http://priceonomics.com/mattresses/#industry) to which I responded: "We need a Warbly Parker for Diamonds" (http://news.ycombinator.com/item?id=4522922).

Niggler posted a comment to this Atlantic article (http://news.ycombinator.com/item?id=4523063) and then submitted it as a new post that didn't get traction because I am guessing of his new status (green name text) in the HN community.

Olalonde (http://news.ycombinator.com/submitted?id=olalonde) who is an old hat commented on the article, but didn't get that many up votes or reply's (http://news.ycombinator.com/item?id=4525901), but submitted the Atlantic article (http://news.ycombinator.com/item?id=4535611) that Niggler found and brought to the HN community.

Now this great article from 1982 is on the front page of HN.

Actually, I posted this article just after reading the story about Russia revealing a secret diamond field containing "trillions of carats" http://news.ycombinator.com/item?id=4534468 (I don't recall reading niggler's comment or yours honestly). I think that's why it got so many up votes. In fact, it seems this article is regularly submitted on HN: http://www.hnsearch.com/search#request/submissions&q=Hav.... Now that I think about it, I think I first discovered this article through HN 2 years ago.

Sorry but is this the real reason why somebody buys a diamond? The number one reason why anybody buys anything expensive is because they wish to make a statement for that moment. Now if you go by what this article is trying to convey is the value of diamonds in the investment per se. No body I know buys diamonds as an investment.

My father once gave me a gift which his father gave it to him. Which is basically a wrist watch that automatically winds a spring inside while a person is walking. That watch is practically useless by today's standards. But that is totally besides the point. He gave it to me because that has some 'emotional value' and the fact that it was expensive at that time, and his father went through a lot of work to buy him that has some sentimental value attached to it. That is the whole reason behind its existence, He gave it to me because it means something to him. Many of my friends have asked me if I want to sell it, but I've turned them down. It looks awesome and is a jewel.

My mom also wears a diamond, and she has told me once she passes away that is supposed to given to me and never to be sold to anybody else. No, De Beers didn't whisper in her ears not to sell it. Its just my dad gave it to her and that diamond reminds her of her days when she was young, and the moment when it was given. That thing reminds her of those days. She just doesn't want some other women to wear it.

You can argue these things in the investment per se. But you don't give the diamond to your girl and that moment is gone forever. You can earn that money back again, but you can't earn that moment back. She won't have that diamond with her which she can remember you gave it to her.

As nerds we can argue about rationality, but what is that worth to human sentiments?

Besides you can expand this argument to everything around. And the only way to live will be to live frugal.

So why do I have to buy my future fiance a diamond to experience that moment? Why not give her a piece of coal? It's the same element/material, just in a different, albeit less attractive, form.

No one's arguing about the idea of giving a gift or a token or your love. The issue is about why this token needs to be a diamond.

I know that in our family, and my girlfriend's, there is a lot of jewellery that is passed down between generations. This is usually gold though, which at least has some value associated with it. It's not like we consider melting any of it down or selling it. But it's nice to have real value associated with generational possessions on top of their sentimental value.

>>So why do I have to buy my future fiance a diamond to experience that moment? Why not give her a piece of coal? It's the same element/material, just in a different, albeit less attractive, form.

Try gifting her a piece of coal and watch.

Really why should you wear a suit? Or why should you wear a watch? Or why should you dine a good restaurant?

There are a few emotions attached to a few things. Like for example Roses.

> Really why should you wear a suit? Or why should you wear a watch? Or why should you dine a good restaurant?

Many people are questioning the first two. :)

"good restaurant" is not quite precise: if you meant "popular", "chic", people are questioning that too. If you meant "has tasty food", then the analogy doesn't hold.

Your roses example is a good one though.

> Try gifting her a piece of coal and watch.

That's the whole point. Coal is a hyperbole here, but her special attitude towards diamonds is something manufactured artificially around 50-60 years ago.

The point is that the vehicle for conveying status doesn't matter. All that matters is that it conveys status. Everything else about it is veneer.

That my all be true, but at the root of it, I find the concept revolting. I mean demonstrating your economic viability as a spouse. It is actually the most unromantic thing ever, because it means at the end of the day you marry for economic reasons, not for love. Which is OK, but then don't pretend for it to be romantic.

As for remembering a moment, I don't see why something expensive is required. You could as well collect a special looking pebble from the beach and have it remind you of the romantic sunset you watched together.

Isn't it possible to love someone because they are the kind of person who is considered economically valuable by society? Such a person is romantically desirable because they offer more resources and their offspring are more likely to survive to adulthood.

(sort of an evolutionary biology / Ayn Rand-ian concept, of course, but I see this kind of reverence for 'the best' coming from some people)

That's what usually happens, I guess. I remember from an old Steven Pinker book that there is a theory that love is a necessary craziness, because without it we would constantly be looking for better mates (the rational thing to do). That would explain why falling in love makes people do silly things, because they demonstrate "I am crazy, therefore you can trust that I will stay with you".

Yes, a person who approaches matters of the heart with the brain of an economist is generally considered pretty cold-blooded.

Not to say that 'normal' people don't ever do such things, but they are often confined to desperate situations (war zones, disaster zones, economic depression, etc).

Great read. Amazing what wealthy interests can do to a market. I had to smile at the ending:

"By the mid-1980s, the avalanche of Australian diamonds will be pouring onto the market. Unless the resourceful managers of De Beers can find a way to gain control of the various sources of diamonds that will soon crowd the market, these sources may bring about the final collapse of world diamond prices. If they do, the diamond invention will disintegrate and be remembered only as a historical curiosity, as brilliant in its way as the glittering little stones it once made so valuable."

As the diamond market hasn't collapsed 30 years on, De Beers must still be doing something right.

I've held a plastic bag of raw Australian diamonds -- they look like dirty grainy sand. Almost all of the Kimberley pipe's output is industrial quality, not gem quality, although the pink gemstones are very nice.

Australian gem quality output was never going to seriously disrupt De Beers, just challenge them a bit. That was known at the time, and I'm slightly perplexed why The Atlantic's article says what is does.

Most of the article seems critical of the diamond industry. Have they not done people a service by providing them with a nice product that they can enjoy?

There are certainly moral problems with how they built their empire, but why are clever marketing and aggressive pricing bad things? The former is simply how you tell people about new products. Remember diamonds went from being owned by almost no one to being owned by lots of people. If those rings make them happy, then why is it our business?

How is DeBeers marketing any different from Apple marketing?

Of course, the article does do a good job in warning people that their diamonds may have little resale value. But that's a risk most buyers are willing to take. After all, most non-divorced people don't sell their wedding and engagement rings.

It's bad because it's a vertical cartel, from mining to distribution. Cartels are illegal in that it limits the free market using artificial price controls. It's the artificial price controls that are illegal. Apple faces competition from Android, RIM and Win8. DeBeers diamonds do not face any competition from any other diamond producer because they spent 50 years establishing their network for "gem" quality diamonds. DeBeers is beyond marketing. Why did the U.S. government go after Microsoft? Standard Oil? Why did the U.S. prevent AT&T from merging with TMobile?

Well no, that argument does not work. Apple is the monopolist supplier of iPhones. And it charges whatever price it wants for iPhones. If DeBeers is a sole (or near sole) supplier of a product, then Apple certainly is.

Further, DeBeers must face the same competition that Apple faces. In these comments, we see lots of people looking at other gemstones (sapphires, etc) in place of diamonds. The other gemstone producers compete with DeBeers in the same way that other smartphone producers compete with Apple.

I'm not sure it's helpful to reason from the fact that something is illegal to why it is wrong. Sort of like the joke about the three storekeepers in jail: The first charged higher prices than everyone else and was convicted of price gouging. The second charged lower prices than everyone else and was convicted of dumping and cutthroat competition. The third charged the same prices as everyone else and was convicted of collusion. Laws will be made against all kinds of things, and there are many incentives (e.g. law firms revenue) to make laws against very profitable enterprises.

This article is regularly submitted to HN, but it's good reading every time. Winning the war against the marketing of the diamond industry will be hard, but a start is to keep spreading articles like the following:

http://www.huffingtonpost.com/ira-weissman/7-reasons-why-you...

7 REASONS WHY DIAMONDS ARE A WASTE OF YOUR MONEY

I've been in the diamond business for over 10 years. I've traveled all over the world buying and selling diamonds. I've passed through most of the major airports across the United States with about a million dollars worth of diamonds in a leather wallet stuffed inside my pants. I've bought and sold diamonds in Dubai, Mumbai, Moscow, Hong Kong, Paris, Stockholm, Tel Aviv, Madrid and Barcelona. Even today I am involved on the fringe of the diamond business, running a diamond education site helping would-be buyers.

Considering my deep personal involvement in the diamond business, my opinion might surprise you -- diamonds are a terrible waste of your money.

Even if this article doesn't convince your female friends, it'll spread some awareness and cause more people to view diamond engagement rings with a bit of doubt.

When I shared it on Facebook, I got likes from only male friends and arguments from a female friend. This was slightly unusual because such topics normally get a few likes from female friends. I guess there's a serious uncertainty among my friends about throwing away the valuing of diamonds that's been strongly ensconced in the minds of wider society.

Fundamentally, a large part of the worth of diamonds comes from their cost and the sacrifice they represent. This in turn is a conspicuous signaller of value, when women show their diamonds to friends ("look how much he loves me"). So any alternative to diamond rings has to show a similar level of value/worth. We have to try to beat diamond marketers at their own game - with equally powerful anti-marketing.

I'd advocate an approach of laying the groundwork early by sharing such articles regularly, and when actually in a relationship, offering a display of value that she appreciates (e.g. memorable trip to Europe, endowment to a cause of her choice, a custom-designed gemstone) in tandem with asking her to consider other gemstones, perhaps one in her favorite color. If the ground's been softened by our combined anti-marketing campaign, she might be willing to select and customize a stone that she genuinely finds beautiful and accept your specially planned trip (maybe extend it to Asia too, to up the friends'-envy quotient).

Or at least I hope as much.

"A diamond is forever."

Translation: Please, please, please don't resell it. You'll screw up our cartel.

Nope, not a problem at all. Because very few people buy used.

So where do all the old ones end up?

I bet quite a few end up in coffins.

After some terrible early experiences with gold diggers, I am now very happy to be with a woman that despises any and all status symbols, and instead of buying them invested some money in gold and silver bullion early on, as part of a diversified portfolio. She routinely spends the money that status-affected women waste on social symbols on travel, sports, fitness and healthy leisure. My advise to all startup entrepreneurs is simple - plan your mating like your startup - lean and goal-driven. Identify your goals, budget, deadline and overall strategy. If you cannot meet the woman that meets your demands where you are, travel and diversify.

Relevant: http://www.csmonitor.com/World/Global-News/2012/0917/Russia-...

Those are tiny, tiny diamonds that could be useful for industrial purposes but will never be useful as jewelry.

A classic, I read it first almost a decade ago.

My advice, take her on a trip to Paris and Versailles instead... or climb Mount Everest if you're more adventurous. We have great memories.

Try not to get her killed, though. Hasn't climbing Mount Everest something like a 20% mortality rate?

According to Wikipedia there have been 4.3 fatalities for every 100 summits (generally decreasing over time), but that can't really be meaningfully expressed as a mortality rate because the fatalities include people who never reach the summit (and may not even have planned to). What can be said is that of those who successfully reach the summit, 1.1% die during the descent.

It appears that the diamond market has reached its peak, and is on its way out: http://www.economist.com/node/21538145

The Oppenheimers have sold their entire stake in DeBeers - they've cashed out. They went from producing 80% of the global market (in the 90's) to 35%; clearly, the writing is on the wall, and without strong centralized vertical management, the diamond market will collapse.

Time to short diamonds.

The discovery of the South African diamond mines in 1870 and its impact on the diamond industry seems to be a good analogy for what the music industry is going through today. In both cases there is rapid shift from scarcity to abundance, and in both cases, the supply side of the market try to save their businesses by engineering artificial scarcity. Somehow I doubt the record industry in its present form will fare quite as well though.

I got my wife a moissonite ring. I took it to a jewelry store once to get it cleaned. The person there went on about how beautiful it was. I said it was moissonite and she quickly said we don't work on moissonite and handed the ring back and left. Everyone assumes it is diamond because it is double refractive and actually brighter than diamond. Only a gemmologist would know the difference.

The Russians just announced that they have a huge amount of quality diamonds on their territory in some site that they haven't started exploiting yet.

To profit they basically have to ape De Beers and create a huge demand in Europe or Asia (I think diamond engagement rings are that big only in the USA)

I think that most of diamonds sold Russia are mined in Russia (Yakutia probably).

Still they are expensive and luxur-ish. I guess Russian jewelers are just riding the world-wide hype wave, not interested in disrupting or "harming" the market.

To be fair, the diamonds at that site are from/the result of a meteor crash, and most are small in diamond terms.

So which of these "predicted" events actually happened?

The diamond cartels continue to prop up a fake market fed by the product of human misery largely by convincing people that diamonds have always been a clear symbol of social status and of devotion.

The story is from 1982. Yet still timely.

A little odd though: "the quality of the diamonds, measured in dollar value, had declined by nearly 100 percent." I wonder how that was calculated ?

One-page, seizure-free view:

http://www.theatlantic.com/magazine/print/1982/02/have-you-e...

If you want a ring that shimmers brightly with color, is unique from stone to stone, and actually has value, try opal.

The only downside is that it's not as tough as diamond, so you have to take some care not to damage it, although this can be mitigated by the way it's mounted in the ring.

Another fantastic bit of information about the history of the diamond trade, courtesy of Frontline, circa 1994: http://video.google.com/videoplay?docid=-6186684678299366197

Well, it is a perceived value, but we all perceive it.

Like someone pointed out, it is not an investment. It is a demonstration for your future marriage. She wants to see how much she's worth to you.

Buy the ring. If you indeed have moral issues, buy the conflict free one.

Previous good discussions on this:

http://news.ycombinator.com/item?id=1405698

http://news.ycombinator.com/item?id=1110283

Can't believe its on the front page, given my comment a few days ago: http://news.ycombinator.com/item?id=4523063

Fantastic read. Bernays (http://en.wikipedia.org/wiki/Edward_Bernays) was also an interesting character.

Similar article, although a less historical perspective:

http://harpers.org/archive/2010/06/page/0059

(warning: paywall)

Generation after generation of brain wash, there is nothing you wouldn't believe, such as Kim Jong Il is the savior of the world.

on another note (also on todays HN homepage!)

"Russia reveals secret diamond field containing 'trillions of carats'" http://news.ycombinator.com/item?id=4534468

By fallenapple ( from showdead):

Ha, they quickly stuck a date in the title. ;) I was going to comment this is a "pre-internet" story. The film Blood Diamond came to mind as I was reading this, and the "Diamond District" in New York City. Lots going on behind the scenes in the "diamond industry". This is a superb lesson in 1. artificial scarcity and 2. how consumers can be conditioned to accept new symbols (a diamond is just a rock; but what does a diamond "mean"?). Both are principles that, for better or worse, apply to how business is done on the web.

> [...] but what does a diamond "mean"?

"I would hurt poor people for you."

So it's just like buying a smartphone?

If you're buying someone a smart-phone so it can look pretty and symbolize your love, then yes, exactly.

So... why is there no second-hand diamond marketplace? Lots of people would want to buy cheaper diamonds and there has to be people wanting to sell theirs.

Good question. There is a second-hand diamond marketplace. But the discount you get is proportional to the extra effort you must exert to get the diamond you want. Do you want a 2 carat triple-A GIA certified round brilliant with VS1 clarity, >I color, and an HCA score under 2? Good luck. You'll spend months tracking that down. And you better know what you're doing or you could get scammed. Or you could go to a diamond wholesaler and get what you want, right now, no hassle, and pay the associated overhead.

So there's an opportunity here, for a market facilitator. Hire a few qualified gemstone appraisers, set up an auction site and take a small rake off the top.

Even better, write some image-processing software that can automatically grade diamonds more quickly and accurately than human appraisers.

Diamonds are already largely graded automatically. DeBeers has invested heavily in grading equipment that can specifically distinguish natural from artificial diamonds.

Such places exist. I know of one (http://eragem.com/) but I'm sure there are others.

The euphemism "Estate jewelry" instead of "secondhand" or "used" seems to be preferred.

Is it me or is the article way too long?

It is just you. That article is a classic in long-form investigative journalism.

God how I miss that.

Where can I find 100's more like this, _on the web_?

Easy: Longform.org.

Slate aggregates and curates some of these:

http://www.slate.com/articles/life/longform.html

Sweet. Thanks.

http://longreads.com

http://longform.org

Sweet! Found an old longform article I had lost the link to and couldn't google back either. Thanks!

Entirely off topic to this post, but given the HN audience, this is one of my all time favorite long form articles:

"Mother Earth Mother Board" by Neal Stephenson. Wired. http://www.wired.com/wired/archive/4.12/ffglass_pr.html

It's about FLAG - Fibre Optic Link Around the Globe. 40k+ words.

That's how I started figuring out it wasn't a recent article. I ran into this link from the G+ HN circle and didn't see a mention of the date.

Then about 1/3 of the way through I started thinking "what the hell, no article can be this long", then I looked at the date.

A great read though, it does a lot to remind us how articles used to be back in the day before our current attention spans.

Atlantic articles that get upvoted on hn are generally pretty long.

It's more a function of the magazine the article runs in. Mags like the Atlantic and the New Yorker still run plenty of long-form journalism.

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