Of Diamonds – Rear View Into The Not-So-Rare Stones

Swapna Mirashi

Did you know: Diamonds are NOT rare, NOT valuable and hence certainly NOT a sign of prestige as they have come to mean. 

What diamonds and the aura they carry around them indeed are, are a proof of millions of people over the years, around the world falling for a clever marketing campaign and a shrewd cartel arrangement behind it. 

History: Well, once upon a time, they were. Long long time ago, when they were only discovered very rarely in a few riverbeds in India or in a few jungles in Brazil diamonds were bought and treasured by royalty. So when, a few British Financiers were approached to fund small projects to mine for diamonds in South Africa, each saw big gains in the proposal and put his (it was mostly men in those days) money on it. Each one was betting on ‘his’ mine to yield the rare stones. But they all soon discovered, none of their investments will yield anything after all. Not because there were no diamonds discovered, but because there were too many of them in a single mine and many such mines discovered in South Africa around 1870.

 

Economics: Price (and thus perceived value) of an item is determined in market by its demand and supply equation. For a non-consumable product category like diamond, its value (and thus market price) remains solely in its rarity. With tons of diamonds mined, each of the financiers realized that his investment was at stake and it will not yield any huge return he was hoping for himself. That if he goes to the market with his discovered gems, so will the others with theirs. Thus diamonds will flood the market and will have to be sold for peanuts. The individual investors realized that they cannot be individually greedy but they still can come together, join hands and hope for some of the returns they were initially hoping to get.

Corporation: The individual investors – who invested in diamond mines thinking theirs will yield the rare stones, but discovered instead that the stones were not rare at all – joined hands. They came together in a cartel around 1890, to show the world NOT WHAT THEY HAD SEEN but WHAT THEY HAD HOPED TO SEE. De Beers Consolidated Mines Ltd. came into being to;

a. regulate the supply of diamonds in the market, across the world

b. to create a perception that diamonds are rare and thus have an intrinsic value, and

c. to ensure control the prices of the stones in market simply by maintaining shortage of supply of these ‘rare’ stones.

De Beers is one of the most successful cartel arrangements in modern commerce and trade. It has been successful in maintaining the steady rise in diamond prices over the years (economic conditions not withstanding) and ruling people’s psyche by creating diamond as a metaphor for love and esteem.

Comments