We all have this idea that De Beers is synonymous with diamonds. This has the merit of having been true for most of the 20th century. We’ve also got this idea that they’re synonymous with diamond mining, this has the demerit of not being true. What they’ve always been is the marketing arm of the diamond industry. True, this meant control over much diamond mining, but that’s a rather different matter. They were a marketing cartel, not a mining one. So, as technology changes it’s not all that much of a surprise to find them moving into synthetic diamonds.
The world’s largest diamond miner is doing the unthinkable: Selling stones produced in a laboratory.
Well, no, it’s not so unthinkable if we concentrate upon what they’ve really been doing.
Now, the 85% Anglo American-held subsidiary is immersing itself in the laboratory grown diamond business, directly challenging others producing manmade diamonds with cheaper products via a company it has set up called Lightbox Jewelry.
It’s been possible to make decent industrial diamonds for decades artificially, gemstone quality ones is more recent.
For years, De Beers has called the synthetic diamond business one of the major risks to the company.
So, as the potential of technology changes, change the company then.
De Beers, which created the famous “a diamond is forever” slogan and once had a near-monopoly on global diamond production, said it was launching the new range of synthetic diamonds to meet demand for “affordable fashion jewellery that may not be forever but is perfect for right now”.
So, to trot through the history. Diamonds were once very rare and very valuable. Then mining techniques changed and we started finding more of them than extant markets at the time could absorb without reducing prices. De Beers was the structure through which this was beaten. The varied mines extant at the time banded together in order to market those diamonds. The idea that a young man should spend two week’s wages (or was it two month’s?) on a diamond for his engagement ring was theirs.
This marketing though increases the value of all diamonds. So they faced the free rider problem. People who owned mines that were not contributing to the marketing efforts still benefited from them. Thus a series of agreements to maintaining some control over the number of diamonds that come to market. Agreements with mines (including the Soviets) to market stones. A willingness to stockpile if production ran ahead of marketing efforts. A determined effort to part non-cartel members from the diamond cutting and polishing trade – if you wanted to have regular access to De Beers produced stock then you had to be very careful not to be found out buying non-De Beers diamond stock.
It’s one of the reasons why stories about stealing vast quantities of uncut diamonds never really worked – De Beers was the only possible buyer in volume.
So, yes, De Beers was a cartel and they did control the price of diamonds by limiting the volumes that hit the market. But they were always a marketing cartel, production limitations were always a reach back down the industry to support that, not the reason itself.
So, now technology destroys that ability. It’s just too easy to make decent synthetics. Thus, as a good marketing organisation De Beers is marketing synthetics.
If we think of De Beers as diamond miners then the move into synthetics looks most odd. If we think of them correctly as diamond marketeers then it all makes sense. Production technology has changed so why not?