De Beers doesn’t just participate in the diamond industry; for decades the company was the diamond industry. A little more than half a century after its establishment in 1888, De Beers devised the industry’s all-important diamond grading system (the 4Cs) to run with the world-famous slogan “A diamond is forever”.
In case you’re wondering, the slogan was created by a young woman copywriter, Frances Gerety. In the 1940s, women copywriters were assigned exclusively to women’s products, as the zeitgeist allowed only for men writing for men. That critical allocation to the De Beers account would lead to what is widely regarded as the best advertising copy of all time. It’s a fantastic story of breaking the diamond ceiling.
It meant that, for decades, De Beers has enjoyed lucrative profits from convincing people to buy something they actually can’t afford. Diamonds are luxury goods, yet they are marketed to consumers who are affluent at best. By associating diamonds with love, the campaign of emotional blackmail has been highly effective. But in case you haven’t noticed the recent American Swiss adverts, the times they are a-changin’.
We need to go all the way back to the 1950s to learn why. Just one decade after Gerety’s work changed the diamond industry and the trajectory at De Beers, industrials conglomerate General Electric (GE) produced the world’s first lab-grown diamonds. Were it not for World War 2 postponing “Project Superpressure” in the 1940s, the lab-grown version might have emerged before the famous slogan.
As tempting as it is to think about how things might have panned out had the lab-grown diamonds arrived before the De Beers campaign, the reality is that GE was focused on industrial applications rather than jewellery. Diamonds have numerous uses as the hardest material in the world. In a classic case of nominative determinism, one of the US physicists credited with the discovery of lab-grown diamonds was Herbert Strong!
Today, lab-grown diamonds can beat natural diamonds on the all-important 4Cs that De Beers so proudly developed back in the 1940s
It was only in 1971 that GE created gem-quality crystals. They were nowhere near good enough to compete with real diamonds, with many inclusions (trapped materials) and a yellow hue that was eventually discovered to be linked to excessive nitrogen. Today, however, lab-grown diamonds can beat natural diamonds on the all-important 4Cs that De Beers so proudly developed back in the 1940s.
Before you run off and buy GE shares in the hopes of profiting from this technology, you need to know that today’s lab-grown diamonds aren’t made using the methodology developed by that company. Instead, chemical vapour deposition (CVD) is used, with the first patent for this process issued in the 1950s and gem-quality diamonds only achieved in the 1980s.
The sudden success of lab-grown diamonds is largely because the technology has developed to the point where dozens of seed diamonds can undergo CVD simultaneously. At the centre of this is a company called WD Lab Grown Diamonds, founded in 2008 by UK jeweller Clive Hill. Private equity firm Huron Capital invested in it in 2019. Critically, the Carnegie Institution of Washington is also a shareholder and happens to be the owner of key patents in the CVD process.
This is what De Beers (and every other diamond mining house) is now up against. In response, De Beers has its own lab-grown diamonds business in the form of Element Six. Another De Beers brand is Lightbox Jewelry, with the entertaining description of “diamonds for everyone” on the website.
But guess what? Lab-grown diamonds also last forever, even if that upsets the De Beers party. They are no different to the real thing. The difference is in the production process rather than the end result. Through being created in a controlled, scientific process, lab-grown diamonds are 100% sustainable and traceable, and these things matter to a millennial audience. Millennials are in their late-20s to early-40s, which happens to be when most people get married. The importance of traceability can’t be overstated.
It’s hard not to see the parallels to the quartz crisis that hit the Swiss watchmaking industry in the 1970s. This led to the creation of Swatch in the 1980s to produce cheap alternatives to mechanical watches and save the local industry. Today, mechanical watches are luxury products and quartz watches are everywhere.
It’s quite possible that mined diamonds will become luxury products (like they should always have been) and lab-grown diamonds will be everywhere. Unlike Swiss watchmakers who had mainly variable costs and business models that weren’t impossible to pivot, De Beers has a portfolio of assets with exceptionally high fixed costs of mining. Some painful disruption (for parent Anglo American at least) may be upon us.
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