By Bill FerrellWell, maybe the title is an overstatement. Or maybe it isn't. Read this and you can be the judge.
Let's start with the question, "Why are diamonds so expensive in the first place?" Good question. Presumably it's not just because people find them so beautiful; it's also because they are rare. Right?
Actually people think that they are rare but in reality they are not. In fact, diamonds are the second most common items in the majority of American households. The most common item is television sets.
A Brief History on Diamonds
In his book, The Rise and Fall of Diamonds, Edward Jay Epstein, describes the history of diamonds and how they have come to have such value today. Going back in history, kings and queens long ago would wear diamonds. And they were precious because they were hard to find and it took a lot of effort to find them.
Then in the city of Kimberly in South Africa, geological rock formations were discovered called Kimberlite (obviously named after the town). In 1871 an 83.5-carat diamond was discovered in a Kimberlite formation. This gave birth to a diamond rush. Suddenly there was a large supply of diamonds. As a result diamond prices fell to about $5 a carat because the supply was so great. All this took place in the 1880's.
Then Cecil Rhodes came along - as in the founder of Rhodesia (which is now Zimbabwe) and the "Rhodes Scholarship." Rhodes was a very clever diamond entrepreneur. He understood that unless something was done, they were going to create a worthless semi-precious stone. He had an idea.
He called all the owners of the diamond mines together and they created a cartel (yes, even before the drug cartel). The purpose of the cartel was to restrict the supply of diamonds. In those days this was easy because most of the diamonds at that time came from a relatively small area in South Africa.
They figured out how many people were getting engaged each year and agreed to allow only that many stones on the market. So, if it were 500,000, they would allow only 500,000 stones to be placed on the market. The rest they would keep in a stockpile. And it worked. They were able to drive the price of diamonds up by managing the supply.
The diamond syndicate came to be known as the De Beers Mining Company (as in today's jewelry company).
But during the Great Depression the demand for diamonds fell. People could not afford to buy diamonds, so De Beers stockpiled the diamonds in London.
However, World War II was good for the diamond industry. As diamonds are among the hardest known mineral on earth, they were good for a number of industrial uses. They were used to cut metal and make tanks and artillery.
After the war, De Beers hired the ad agency of N.W. Ayer. They understood that what a woman wanted (from a man) was a tangible symbol of his love. So they were the ones who made the diamond into that tangible symbol. Part of their strategy introduced diamonds into Hollywood.
They opened an office in Hollywood in order to get diamonds into films. Its entire business was creating a partnership between movie producers and De Beers. Songs like Marilyn Monroe singing Diamond Are A Girls Best Friend, didn't just come out of thin air: A kiss on the hand may be quite continental, but diamonds are a girl's best friend.
And the bigger the diamond the greater the tangible sign of love. A.W Ayer also planted the idea that "diamonds are forever" and therefore not only a symbol of eternal love, but an investment. But do diamonds truly appreciate over time? Unfortunately that is a myth. The diamond you bought 10 years ago will cost the same or more today. However, you could never sell the diamond for that amount. The drop in resell value is 20-30%. Only diamonds that have some sort of "special" history may gain value with time.
Choose wisely
A lesson from this brief history on diamonds is that value is something that can be created. Diamonds have value because "the market" has determined that they are valuable. If the market determined that Cool Whip was as valuable as diamonds, then I'd be in a lot of debt.
What we value determines the way we live. The choices we make. The way we invest our lives. It is one of the greatest decisions we will ever make.
Jesus illustrated this well in a story he told. The story was about two men who each built a house on two different foundations. The wise man built his house on a rock. So when the storms of life assaulted his house, it remained standing. The foolish man built his house on sand. So when the storms assaulted his house, it collapsed (Matthew 7:24-27). Foundations are important. Values are essential.
Let's be wise to build our lives on rock-solid values.
Be wise on what you choose to value and how you build your life.
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