The Truth About Diamonds

Summary

The video script reveals the fascinating history and marketing strategies behind diamonds' enduring status as symbols of love and engagement. It dispels the myth of diamond rarity, attributing their high cost to business tactics and advertising rather than actual scarcity. The narrative traces the discovery of diamonds in India, their evolution into polished gems, and the pivotal moment in 1869 when vast deposits were found in South Africa, sparking a rush and conflict. Cecil Rhodes' consolidation of mines into De Beers and the creation of shell corporations controlled the market, manipulating supply to maintain high prices. The script also details how De Beers, facing competition and market saturation, turned to advertising to link diamonds with eternal love, successfully creating and perpetuating the notion that larger, more expensive diamonds represent greater love. This strategy was replicated globally, making diamonds a staple in engagements and a profitable industry, despite recent challenges to De Beers' dominance.

Takeaways

• 💍 The idea that a diamond ring symbolizes love is deeply ingrained in society, largely due to successful advertising campaigns.
• 💎 Diamonds are not rare in nature, but their high cost is attributed to business practices and marketing rather than their actual scarcity.
• 📈 The concept of 'A Diamond is Forever' was created to boost sales and implies that diamonds hold their value, which is crucial for the industry's pricing strategy.
• 🇿🇦 The discovery of diamond mines in South Africa in the 19th century led to a significant increase in diamond supply, which initially caused a drop in their value.
• 🛠️ Cecil Rhodes and the De Beers company consolidated the diamond industry, creating a monopoly that controlled the supply and price of diamonds globally.
• 💰 The Oppenheimer family became influential in the diamond industry, eventually gaining control of De Beers and maintaining a significant impact on the market.
• 🌏 De Beers' control over the diamond market was so significant that they could influence prices regardless of the actual supply, ensuring profitability.
• 🚫 The notion of buying a used diamond was made taboo to maintain the value of new diamonds and to prevent a secondary market from developing.
• 📉 The diamond industry faced challenges with oversupply and economic downturns, such as during the Great Depression, but managed to recover through strategic marketing.
• 🎬 Advertising played a crucial role in shaping the cultural significance of diamonds, associating them with love, marriage, and status.
• 🌸 The success of De Beers' advertising campaigns transformed the diamond from a semiprecious stone to a symbol of enduring love and commitment.

Q & A

What is the traditional symbol for an engagement proposal as described in the script?

The traditional symbol for an engagement proposal is a diamond ring, which is often associated with the expression of love, where the bigger the diamond, the more love is symbolized.

Why are diamonds considered expensive despite their availability?

Diamonds are expensive due to savvy business practices, sometimes unethical, and successful advertising campaigns rather than their actual inherent value based on supply and demand.

What is the origin of the term 'carat' used for measuring diamonds?

The term 'carat' originates from the practice of the Dravidian people in India, who weighed diamonds in relation to the seeds of the carob tree.

How did the discovery of diamonds in South Africa in the 19th century impact the region and the global diamond market?

The discovery of diamonds in South Africa led to a rush for the precious stones, causing a significant increase in land value and sparking the First Anglo-Boer War. It also led to the establishment of the Kimberley Mine, which produced diamonds by the ton and significantly influenced the global diamond market.

Who was Cecil Rhodes and how did he influence the diamond industry?

Cecil Rhodes was a British businessman who started by renting water pumps to miners and eventually bought up claims of land from smaller mining operations. He consolidated the diamond industry by forming De Beers Consolidated Mines, Ltd, creating a monopoly and controlling the supply and price of diamonds.

How did De Beers manage to maintain the high value of diamonds despite the increasing supply?

De Beers maintained the high value of diamonds by creating shell corporations to control the supply and setting a 'fixed' diamond price. They made it appear as though the market set the price, effectively controlling the supply and demand dynamics.

What was the significance of the 'A Diamond is Forever' advertising campaign?

The 'A Diamond is Forever' campaign was significant as it successfully associated diamonds with love and marriage in the United States, leading to a 55 percent increase in diamond sales by 1944. It also promoted the idea that diamonds were to be held forever, not sold or resold, which helped maintain their value.

How did the Oppenheimer family come to control De Beers?

Ernest Oppenheimer, using the wealth from the sale of the Premier mine, bought enough shares in De Beers to become a board member. Eventually, he became the chairman and the Oppenheimer family held control of the company until 2011.

What was the impact of the Great Depression on the diamond industry?

The Great Depression led to a decline in the diamond industry due to reduced sales and the discovery of new mines in Australia, Siberia, and Western Africa, which saturated the market.

How did the diamond industry adapt to the changing market conditions in the late 20th century?

The diamond industry adapted by focusing on advertising campaigns that reinforced the idea of diamonds as a symbol of love and commitment. They also targeted new markets, such as Japan, where the tradition of giving diamond engagement rings was not as established.

What is the current status of De Beers in the diamond market?

De Beers no longer has a stranglehold on the diamond market due to recent events, including lawsuits and revolts by diamond supplying nations. However, the notion of diamonds as a traditional symbol of love and the idea of spending two months' salary on an engagement ring have kept the diamond industry profitable.

Why is the idea of buying a used diamond considered taboo in the context of the diamond industry?

The idea of buying a used diamond is considered taboo to maintain the perceived value and price control of diamonds. If people started selling and buying used diamonds, the artificial scarcity and high value created by the industry could be undermined.

Outlines

00:00

💎 The Myth of Rarity: Diamond Engagements and Monopolistic Practices

This paragraph delves into the common belief that diamond rings symbolize love and commitment, and how their high cost is not due to rarity but rather the result of strategic business practices and advertising. It traces the history of diamonds from their discovery in India around 700-800 BCE to the modern era. The narrative highlights the transformation of diamonds from a dull trade item to a meticulously cut and polished gem, and the pivotal role of Cecil Rhodes and the De Beers company in creating and maintaining a monopoly over the diamond industry. The paragraph also discusses the impact of the discovery of diamond mines in South Africa in the late 19th century and the subsequent conflicts it sparked, including the Anglo-Boer Wars.

05:04

💰 Monopoly and Marketing: The Rise of De Beers and Diamond Valuation

The second paragraph outlines how Cecil Rhodes' acquisition of the De Beers mine marked a significant shift in the diamond industry. As diamond prices fell due to oversupply, Rhodes and other mine owners decided to consolidate into one company, De Beers Consolidated Mines, Ltd, aiming to control the market and set a fixed diamond price. This strategy effectively created a monopoly, allowing De Beers to manage supply and demand, and thus, the value of diamonds. The paragraph also reveals how Ernest Oppenheimer's involvement led to the Oppenheimer family controlling De Beers for much of the 20th century. It discusses the industry's challenges during the Great Depression and how a strategic advertising campaign, including the famous 'A Diamond is Forever' slogan, was used to boost sales and embed diamonds as an integral part of marriage and love in the American consciousness.

10:07

💍 Cultural Perception and the Enduring Legacy of Diamond Engagements

The final paragraph discusses the importance of maintaining control over the diamond market to protect its luxury status and the public's perception of its value. It highlights De Beers' continued success in shaping the cultural significance of diamonds, especially in Japan, where diamond engagement rings became the norm through targeted advertising. The paragraph also touches on recent challenges to De Beers' dominance, including legal battles and resistance from diamond-producing nations. However, it emphasizes the enduring legacy of their marketing campaigns, which have made diamonds a traditional symbol of love and commitment, with the notion of spending two months' salary on an engagement ring deeply ingrained in popular culture.

Keywords

💡Diamonds

Diamonds are a type of carbon allotrope known for their exceptional hardness and brilliance. In the video's context, they are presented as a symbol of love and status, largely due to successful marketing campaigns. The video discusses how diamonds' value is not solely based on their rarity but also on the business practices and advertising that have shaped their perception.

💡Engagement Ring

An engagement ring is a ring indicating that the person wearing it is engaged to be married. The video highlights the cultural norm of using a diamond ring as a symbol of engagement, which has been popularized by advertising campaigns that link larger diamonds to greater expressions of love.

💡De Beers

De Beers is a company that historically had a near-monopoly on the diamond industry. The video explains how De Beers controlled the supply of diamonds, creating artificial scarcity to maintain high prices. It also discusses how De Beers used subsidiary companies to manipulate the market and set 'fixed' diamond prices.

💡Scarcity

Scarcity refers to the state of being scarce or not readily available. In relation to the video, scarcity is a key factor in the value of diamonds. The video discusses how the perception of scarcity, rather than actual scarcity, has been used to justify the high prices of diamonds.

💡Cartel

A cartel is an association of manufacturers or suppliers with the purpose of maintaining prices at a high level and restricting competition. The video describes De Beers as the most successful cartel in modern commerce, highlighting its control over the diamond market and its ability to set prices.

💡Advertising Campaign

An advertising campaign is an organized effort by a firm to promote its products or services, often using various media. The video details how De Beers and other diamond companies used advertising to associate diamonds with love and marriage, notably with the slogan 'A Diamond is Forever,' which was instrumental in increasing diamond sales.

💡Monopoly

A monopoly occurs when a single entity dominates a market or resource. The video explains how Cecil Rhodes and De Beers aimed to create a monopoly in the diamond industry by centralizing production and mining under one corporation, thereby controlling the supply and price of diamonds.

💡Oppenheimer Family

The Oppenheimer family became significant players in the diamond industry through their ownership of the Premier mine and subsequent involvement with De Beers. The video discusses how Ernest Oppenheimer's strategic investment in De Beers allowed his family to gain control and influence over the company and the diamond market.

💡Market Saturation

Market saturation occurs when the supply of a product in the market exceeds the demand. The video describes how the discovery of new diamond mines and the Great Depression led to market saturation, causing a drop in diamond prices and a threat to the industry's profitability.

💡Fixed Price

A fixed price is a price set by a seller and does not change regardless of market conditions. The video explains that De Beers implemented a fixed price for diamonds, which was maintained through control of the supply and the use of shell corporations to simulate market competition.

💡A Diamond is Forever

This phrase, coined by the ad agency N.W. Ayer for De Beers, became a highly successful advertising slogan. The video discusses how this slogan was used to promote the idea that diamonds are not only a symbol of eternal love but also a good investment, as they hold their value over time.

Highlights

Diamonds are not as rare as commonly believed, and their high cost is more due to business practices and advertising than inherent value.

The concept of a diamond ring symbolizing love and commitment is largely a result of successful marketing campaigns.

The weight unit for diamonds, carats, originated from weighing diamonds against carob tree seeds.

Diamonds were used as valuable trade items in ancient times but were not as brilliantly cut or polished as modern stones.

The discovery of diamond mines in South Africa in the 1860s led to a rush and significant increase in diamond production.

Cecil Rhodes played a key role in consolidating diamond mines into the De Beers company, creating a virtual monopoly.

De Beers used shell corporations to control the diamond market and set a fixed price, independent of actual supply and demand.

The Oppenheimer family gained control of De Beers and continued its dominance in the diamond industry until 2011.

The 1938 discovery of new diamond mines and the Great Depression led to a decline in the diamond industry, prompting a new marketing push.

The 'A Diamond is Forever' ad campaign helped tie diamonds to love and marriage, increasing diamond sales by 55% in the US by 1944.

De Beers promoted the idea that diamonds should be held forever and buying used diamonds was taboo, to maintain price control.

De Beers' advertising campaigns successfully transformed diamond engagement rings from a rarity to a norm in countries like Japan.

Despite legal challenges and changes in the diamond market, the notion that diamonds symbolize love has kept the industry profitable.

The idea of spending two months' salary on an engagement ring was popularized by De Beers, further driving up diamond prices.

Even those aware of the marketing behind diamonds continue to buy them due to societal perception, ensuring the industry's ongoing success.

The transcript provides a detailed history of the diamond industry, from ancient times to modern marketing tactics.

The story of De Beers and its impact on the diamond market offers insights into the power of advertising and market control.

The transcript challenges the perceived value and rarity of diamonds, encouraging a critical look at consumer culture and marketing influence.

Transcripts

The Truth About Diamonds

An expensive meal at a fancy restaurant, a declaration of romance, and a big, fat diamond

ring- this is a pretty standard formula for an engagement proposal.

After all, it has been ingrained in all of us that a diamond ring equals love and the

bigger the diamond, the more love there must be.

Well, believe it or not, diamonds really aren’t all that rare.

In fact, the reason diamonds cost so much is more due to savvy (and sometimes unethical)

business practices and incredibly successful advertising campaigns than the actual inherent

value of the stone based on supply and demand, something anyone who has actually tried to

sell a diamond quickly comes to realize.

Here now is the story of how and why we all fell in love with diamonds.

The first known diamonds discovered by humans happened about 700 or 800 BCE in India by

the Dravidian people (who are still found today in southern India and Sri Lanka).

In fact, this is where we get the unit of weight for diamonds, carats, from; they would

weigh the diamonds in relation to the seeds of carob tree.

Diamonds appear in ancient tales dating back to at least 2500 years ago, including ones

involving Alexander the Great and Sinbad the Sailor.

Pliny the Elder, in his 78 AD encyclopedia Natural History, also spoke of diamonds.

Eastern traders brought them to Europe, along with silk, spices, and other exotic goods,

and they were used as valuable trade items.

But those ancient diamonds weren’t the stunning, brilliantly cut stones we know today.

They were dirty, rarely cut or polished correctly, and were often quite dull.

The dazzling stones we recognize from modern times are put through labor-intensive cutting

and polishing (which is where much of the real, albeit relatively small, value of all

but the largest of diamonds actually derives from).

As Joan Dickinson’s book The Book of Diamonds puts it, diamonds could lie around unnoticed

for decades in the ground of India before a “knowledgeable eye (could) spot a diamond

in the rough.”

Even with diamonds being found in the jungles of Brazil in the early 19th century, and including

India’s contribution, the entire world production of gem diamonds was only a few pounds per

year at this point.

That all changed in 1869.

Prior to 1869, South Africa’s main exports were wool and sugar, nothing that was rare

or native exclusive to the region.

There was really nothing there prior that interested Europe.

(Hence why “The Scramble for Africa,” the nickname for the European takeover of

Africa, didn’t begin until 1881.)

So what changed?

In 1866, a young Boer (a word referring to a South African farmer of Dutch or German

descent) found a 22 carat diamond (for comparison, nearly half the size of the Hope Diamond)

in a stream bed near Vaal River in modern-day South Africa.

Three years later, an 83 carat diamond was found by a shepherd boy near the Orange River

in South Africa.

Nicknamed the “Star of South Africa,” the diamond touched off a rush in South Africa

with the British leading the way.

Soon after, four mines were dry-dug and the largest diamond deposit ever was found.

The largest of these mines was called the Kimberley Mine, or the “Big Hole.”

Diamonds came out of those mines by the ton.

The value of land in the region, and subsequently the rest of Africa due to the hope that there

were more diamonds to be found, shot up.

A titanic struggle-turned-war for land began between European powers, most notably Britain,

and the Boer population who lived in the region.

For four months between December 1880 and March 1881, the First Anglo-Boer War raged.

The British would end up winning, but at a much higher cost of manpower than originally

thought.

408 British soldiers were killed, while only 41 Boers. 18 years later, the second Anglo-Boer

war would commence with even greater casualties.

Meanwhile, the fighting and the sheer amount of diamonds coming out of the South African

mines were making the British owners of the mines quite nervous.

The value of their product depended on scarcity and demand.

With too many diamonds and a market fearful of the violence, the demand was dropping and

value of diamonds went down.

In the late 1880s, diamonds were essentially a semiprecious stone (equivalent to today’s

turquoise or topaz) and many of the mines were at-risk of closing.

Enter British native Cecil Rhodes who got his start renting water pumps to miners in

1869 at the beginning of the South African diamond rush.

From the money earned, he bought up claims of land from smaller mining operations.

When many small operations were closing and selling land due to the over-saturation of

diamonds in the market, Rhodes was buying.

Ignoring the more-established Kimberly Mine, he made the purchase that would send him into

history.

The old De Beer mine was owned by two Boer brothers, Johannes Nicolaas de Beer and Diederik

Arnoldus.

Rhodes bought it off them for, at the time, a reasonable price.

As Rhodes’ empire continued to grow, the immensely wealthy Rothschild Family (or at

least, their bank) providing some financial backing (it is unclear how Rhodes and the

Rothschild knew each other), and as every other South African mine leveled off, the

De Beers did not.

In 1888, as diamond prices continued to fall, there were only a few mine owners left, including

Rhodes and his De Beers mine.

The remaining mine owners decided that the only way their industry would survive was,

instead of competing with one another, to consolidate and form one giant mining company.

The intention was to create a monopoly in the industry, centering all the production,

mining, and lands in the hands of one corporation.

And that corporation was De Beers Consolidated Mines, Ltd headed up by Cecil Rhodes.

From that point forward, the De Beers Company was nearly the sole owner of every single

South African mine.

Rhodes and De Beers created individual subsidiaries and “trading companies,” to make it look

like these were different companies operating independently.

They were not and all were part of the parent De Beers Company.

Today, these would be called shell corporations and would be illegal in most regions of the

world.

Essentially, what De Beers was able to do was to set one standard, or “fixed,” diamond

price, with minimal fluctuation between their subsidiaries, and make it look like the market

set the price.

Now, the actual supply and demand value didn’t matter anymore because De Beers controlled

all of the supply.

As a 1982 The Atlantic article put it, “De Beers proved to be the most successful cartel

arrangement in the annals of modern commerce.”

Upon Cecil Rhodes’ death in 1902, De Beers owned ninety percent of the world’s (not

just South Africa’s) diamond production, but after years of ruthless business practices,

his company was about to be outsmarted.

The Premier mine (later called the Cullinan mine, after the town it was located in) was

one of the only mines not owned by De Beers, despite overtures from the company about buying

it.

The owners didn’t want to contribute to the De Beers monopoly, so instead they sold

to independent dealers, the Oppenheimer brothers.

In 1905, the largest rough diamond ever found was in the Premier mine, weighing in at an

absurd 3,106 carats.

Now, the Oppenheimer brothers, particularly Ernest Oppenheimer, were in business.

Ernest Oppenheimer knew that, while his own Anglo American Corporation was doing well,

no one would be able to defeat De Beers at this time.

So, he took the expression “if you can’t beat them, join them” seriously.

Using his newfound wealth, he bought enough shares of De Beers to land himself on the

board of the company.

By 1926, he was the second largest shareholder in the company, behind only Solly Joel.

As it turned out, Joel and Oppenheimer were friends and had already conceived a plan where

Oppenheimer would become chairman of the board.

Oppenheimer did exactly this and renamed the company the Diamond Corporation.

The Oppenheimers would hold control of the company until 2011.

In 1938, the diamond industry was again in decline, thanks to the discovery of mines

in Australia, Siberia, and Western Africa and the Great Depression reducing sales, which

again saturated the market.

So, Ernest sent his son, Harry, to New York City to meet with the ad agency N.W.

Ayer, which was the same agency that helped their financial backer Morgan Bank.

Together, they realized that the United States was a significantly under-tapped market for

diamonds.

They just need to figure out a way to convince Americans to buy their product.

They did just that by using the happiest and, perhaps, occasionally most irrational of human

emotions – love.

Using newspapers, magazines, the new medium of movies, and even a series of lectures at

high schools across the nation centered around diamond engagement rings, they constructed

the illusion that diamonds equaled love, with a bigger (and more expensive) diamond meaning

more love.

“A Diamond is Forever” was shown in ads depicting young lovers getting married or

on their honeymoon.

(In truth, diamonds are easily shattered, burnt and turned into carbon dioxide with

the help of an abundant supply of oxygen, chipped, etc.)

These ads appeared everywhere, often using big name movie actors to foster this connection.

And it worked – by 1944, the sale of diamonds had increased by 55 percent in the United

States from just a few years before and were now inexorably tied to love and marriage,

as well as being seen as a highly valuable item that would last forever.

This idea of diamonds being “forever” and to be passed on from generation to generation

was a particularly important notion.

You see, as more and more diamonds were held by individuals, eventually there would be

so many out there that if people started trying to sell them, the reality of the value would

be discovered and the price of cut diamonds would also ultimately no longer be controllable

by De Beers, something not lost on the company.

Thus, diamonds not only had to be forever held by the individual, but the idea of buying

a used diamond to show affection had to be firmly taboo.

Harry Oppenheimer commented on all this in 1971:

A degree of control is necessary for the well-being of the industry, not because production is

excessive or demand is falling, but simply because wide fluctuations in price, which

have, rightly or wrongly, been accepted as normal in the case of most raw materials,

would be destructive of public confidence in the case of a pure luxury such as gem diamonds,

of which large stocks are held in the form of jewelry by the general public.

In any event, thanks to a virtual monopoly and perhaps the most effective ad blitz of

all time, diamonds were here to stay and, again, De Beers could set its price, no matter

if supply was high or low.

In fact, the higher the price, the more love one was now demonstrating.

De Beers repeated these types of campaigns throughout the developed world with resounding

success.

For instance, in Japan in 1967, diamond engagement rings were given only 5% of the time.

Within a decade, thanks to some savvy advertising, more than half of all engagement rings in

Japan had diamonds on them, with that number rising steadily ever since.

Today, thanks to a series of very recent events, including several lawsuits and something in

the way of a revolt by several diamond supplying nations against De Beers, De Beers no longer

has a stranglehold on the diamond market, but the idea that diamonds are the traditional

way to demonstrate true love and that one should spend two months’ salary on a diamond

engagement ring (an idea embedded into popular culture via an old diamond ad campaign, first

as one month’s salary, and later increased to two with the slogan “How else could two-months’

salary last forever?”) has kept the diamond industry remarkably profitable.

After all, even for those who know all this about diamonds, thanks to popular perception,

giving the gift of a diamond is still the defacto way to convert money into a demonstration

of love, with no immediate end

in sight.