Are you saving up to buy the perfect diamond engagement ring for the lady of your dreams? Well, you might want to find another way to show your devotion.
As it turns out, the diamond engagement ring tradition is a cultural sham invented by the marketing team at De Beers. Diamonds aren’t as rare or valuable as we’ve been lead to believe.
A little advertising history lesson actually shows that De Beers hired a Don Draper-esque ad man to help them revitalize the diamond industry, which was seriously flagging after the Great Depression. The campaign worked so well that the world has come to view diamonds as an indication of status, wealth, and even love.
But you and your bride-to-be will be better off if you can see past the glitz and glamor. Here’s why you should dump the diamonds:
A Little Thing Called Intrinsic Value
The main reason why diamonds are such a scam is because of their “intrinsic value.” This means that the actual diamonds aren’t worth very much on their own — they’re just shiny rocks we consider valuable because of artificial qualities like perceived scarcity and markup.
But despite the high price tag, diamonds are actually depreciating assets. As the Priceonomics blog further elaborates:
“An asset’s value is essentially driven by the (discounted) value of the future cash that asset will generate.”
The moment you leave a store with your shiny, new diamond, you’ve already lost more than half its value. This is because diamonds are sold at a whopping 100% to 200% markup.
Additionally, the diamond market isn’t fluid. The markup means that no retailer is ever going to buy a diamond back from you, and the static market means that there’s no way to expect that anybody else would pay as much as you did for a diamond you bought at a jeweler.
Advertising Strikes Again
Perhaps the most fascinating aspect of diamonds, and their popular allure as engagement rings, is the fact that this “magical moment” for lovers was invented by an advertising agency.
After the Great Depression, diamond moguls De Beers was struggling.
In fact, the entire industry was flagging, which is how De Beers was able to buy up nearly all the diamond mines. They bought all the diamonds from the mines they didn’t own, and as such were able to tightly control the diamond industry.
Diamonds aren’t expensive, nor are they actually rare. They’re neither. De Beers simply maintains a stranglehold on the supply.
Once De Beers controlled the majority of the diamond supply, they enlisted a Madison Avenue advertising agency to convince everybody that a bigger diamond equates to more wealth, and even more love.
Hype Creates a Tradition
De Beers worked hard to make to convince everyone that diamonds were the way to show that you were a wealthy, successful individual, and that you were loved to boot. They got celebrities and fashion designers in on the scheme, and before long the entire world was going diamond-crazy.
It worked. Before the late 1930s, diamond engagement rings weren’t a tradition. Now they’re the norm no matter where you go, and nobody can seem to remember a time when this wasn’t so.
As it turns out, though, this tradition is really just the brainchild of some clever marketing executives.
What Do You Think?
Do you think diamonds are a scam or do you still value your jewelry? Share your thoughts in the comments.