The Diamond Curtain

120-second read

Remember how, in The Wizard of Oz, the small dog Toto pulls back the curtain to show that the mighty ‘Wizard’ is just a regular man using machines to make himself look rather more impressive than he really is?

I want to talk about what happens when a technology is invented, and it suddenly shows us how much of a product’s value existed in the story built around it.

In 1477, Archduke Maximilian of Austria gave Mary of Burgundy a gold ring set with diamonds. He planted the seed for what would eventually become a tradition.

Fast-forward to 1947. De Beers had a bit of a problem. Not enough people were buying diamonds. So they brought in an advertising agency called N.W. Ayer to help. The folks at the agency got on the problem, and gave us those immortal four words:

‘A Diamond is Forever’.

The slogan became one of the most successful pieces of advertising ever created.

It helped convince generations of us that a diamond ring was the serious way to propose, and that diamonds weren’t really something you sold afterwards. You handed them down, and they became part of the family.

Nobody forced anybody to buy a diamond ring. They didn't need to. That's what a good enough story does for you.

For decades, it worked.

But something interesting was happening elsewhere in China.

Although synthetic diamonds had already been produced in the West, China couldn't easily get the industrial diamonds it needed, so its engineers started figuring out how to make their own.

You see, the Chinese engineers were not trying to design a diamond for the luxury market. They wanted industrial diamonds, useful for cutting, drilling and other heavy-duty applications. 

That’s what they were aiming for. Not the jewellery industry.

The jewellery market caught a stray here. They were never the target.

So over time, the technology got better. Much better.

Eventually, you could grow diamonds good enough for jewellery. And that created a bit of a conundrum for a seventy-year-old advertising slogan.

If one diamond came out of the ground, and another came out of a machine, but both looked like diamonds, behaved like diamonds and were diamonds, what exactly were you shelling out that extra money for?

The quality gap between lab diamonds and mined diamonds has closed. There's no longer a good reason to pay ten times more for the mined version, especially in this economy.

The mined diamond didn’t change. Technology just gave us something to compare it with.

That's all it takes. One competitor who can make the same thing better and faster, and then suddenly hey presto a hundred years of marketing starts coming apart like a badly packed kebab.

The traditional diamond industry does support miners, sellers, communities, national economies, so real people are feeling this. But that's the cost of a hundred-year-old story finally meeting a fact-check, not a reason to keep paying the premium.

And it leaves De Beers with an impossible job. Explaining why a rock is worth ten times more than an identical rock, for reasons that have nothing to do with the rock.

Which brings us back to Toto.

Sometimes all it takes is for someone to pull back the curtain.

Lab-grown diamonds haven't made natural diamonds worthless. They've just made the marketing bill finally come due.