Last fall, a cache of potentially trillions of carats worth of diamonds was discovered in Russia, and its impact on the diamond market was instantaneous. The reason why, however, may surprise you.
Ever since the discovery of large South African diamond deposits back in 1870, the De Beers corporation has had a near monopoly on the market. It was not until only a few years ago, when Russia and Australia both started finding their own diamond deposits, that De Beers had any competition at all.
Upon discovery of this latest hoard of diamonds, De Beers stock plummeted to around 45% of its original value. Many would believe that this makes sense because of supply and demand. After all the demand has stayed constant but the supply has rapidly increased, so of course the De Beers stock would take a hit, right? Not entirely.
The truth is, there has always been an abundance of diamonds. The fact that more diamonds being found was not the catalyst for a rapid change in the diamond market, but rather, it's the fact that someone other than De Beers has found them. Remember, diamonds are nothing more than compacted carbon, which is an element that is not particularly hard to find on this planet.
Okay, so De Beers had a monopoly on the diamond market and now they don't, these things happen. However, this is not even about their broken monopoly, but rather, why there has ever been a demand in the first place.
The act of bestowing a prospective bride with a diamond ring has always been an expression of a man's ability to provide for her and their soon-to-be family. For a long time, the magnitude of this expression was not of particular importance to many in America, and between 1919 and 1938, diamond sales had dropped by over 50% and their quality by almost 100%. If it weren't for De Beers, we may not even care about diamonds today.
Knowing that they had to do something, De Beers came up with an ingenious plan. For the first time, a company decided not to advertise itself, but instead promote the market for its goods. Because De Beers was the only serious diamond manufacturer for America, it worked wonders. They worked their way into the American consciousness by providing large diamonds for celebrities and royalty alike to wear. With the widespread use of the television, soon everyone was seeing these high-status people in their living rooms and were all associating diamonds with a life worth living. De Beers was saved.
In a mere three years they had not only halted the decline in the diamond market, but had actually sparked a verifiable diamond craze, with the sale of diamonds increasing by 55% in the United States during that time span. Their advertisement campaign was wildly successful, and could be construed as one of the first attempts at large-scale product placement, and perhaps even subliminal advertising.
Next time you see a woman with an impressive ring on her finger, take a second to think about this. It's just compacted carbon. For many years Americans didn't even care that much about it. It serves no functional purpose, and is not even rare. Truly, it is nothing more than a manufactured status symbol. If the recent findings in Russia are any indication, chances are high that it won't be that way for much longer.
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