IamA programmer who writes code for calculating diamond prices. AMA about De Beers, the diamond industry, synthetic diamonds, engagement rings, etc.
I am the CTO of Enchanted Diamonds, an online diamond jewelry retailer. I got into this business when I met a guy whose family had been diamond sellers for generations, and he wanted to turn his family business into a more technology-oriented online company, making custom-designed diamond jewelry more accessible to people who don't necessarily live near where it's manufactured.
Anyway, our company works with a large number of international diamond sellers and polishers, as well as jewelry setters and manufacturers. Our offices are in midtown Manhattan, so as to be located near the diamond district in New York City. As CTO, my job involves designing and managing the technology that assists with the logistics of buying and selling diamonds and manufacturing and rendering diamond jewelry, as well as supervising our other software developers. I am exposed to many parts of the jewelry industry, so I could probably answer most questions that anyone would have about diamonds.
edit: Answers to common questions:
Various De Beers Questions:
Diamonds have been valuable since antiquity, and have a history of being used in engagement rings by European nobility, but they used to be something that only wealthy people could afford. When huge deposits of them were discovered in Africa, there weren't enough wealthy people to buy them all, so De Beers started marketing them to middle-class people.
Back in the 1930s, a couple would start having sex as soon as they got engaged, because it was kind of important to a guy that his wife was only ever with him, but there was no harm in starting early. So a lot of couples would be in sort of lengthy engagements until they were ready for the logistics of being a married couple. However, some guys would ask a girl to marry them, then start having sex, then eventually call off the engagement. This really sucked for the girl, since that'd be a huge scandal for her and her family. So De Beers got the idea to market diamond engagement rings as a sort of insurance against the guy taking off, (hence the "Diamonds are forever" marketing slogan) and it worked really well for them, financially.
However, De Beers doesn't control the diamond industry to the extent that they used to. They actually lost a ton of money during the 1990s, trying to keep their monopoly. They're still the biggest player, but they only control 30-40% of the market now. This article explains it better.
These days, diamond prices are controlled much more by market forces, and not so much by cartels. However, increased demand for diamonds from Asia, especially India, has caused wholesale prices to increase, while the share of the cost going to middlemen went down. Overall, diamond prices have been fairly stable over the last few decades, although they've become less stable since De Beers lost control of the market.
No, lab-created diamonds are not perfectly flawless. They do have characteristic flaws, and they can be distinguished from natural diamonds via a number of techniques like those listed here. However, the presence of certain types of inclusions can often allow a gemologist to quickly rule out certain diamonds from being synthetic, leading some smug Redditors to apparently conclude that the way gemologists know a diamond is synthetic is when it's flawless. That's not true though. CVD (synthetic) diamonds do have inclusions (flaws), it's just that they're only specific types of inclusions, which sends up a red flag if a gemologist suspects that someone is trying to pass off a synthetic diamond as a natural one.
When someone sells a diamond now, they also need to have it certified, in order to make sure it's not synthetic or a diamond simulant, and to grade it on various characteristics. Sort of like having a house or a car inspected before you buy it. However, it gets exponentially harder to create synthetic diamonds the larger you make them, and for diamonds larger than 1 carat, it's often cheaper to just buy a natural diamond. The largest synthetic diamond seller is probably Gemesis, and if you look at their larger synthetic diamonds, you'll probably be surprised at how expensive they are.
Also, if you had a synthetic diamond and were trying to sell it, there would be very few dealers who would want to buy it. The whole diamond dealing, wholesale diamond selling network trades exclusively in natural diamonds. If you know what you're doing or have connections, it's actually pretty easy to sell diamonds via this network.
Diamonds aren't actually worth anything!
The thing that determines if something has value is whether it can be exchanged for other things that have value. And in that sense, diamonds are very valuable, at least if they're good quality and properly graded and certified. My business partner's grandparents escaped Germany during the Holocaust, after the Nazis had seized all their property. They were able to bring a few diamonds with them though, and they were able to sell these diamonds in order to get enough money to start a business. This is why diamonds are used as a way of smuggling wealth, since high-quality diamonds are worth far more per unit of weight than gold or platinum is. For this reason, we have to comply with a bunch of strict anti-money-laundering laws, which it wouldn't make sense to impose on us if diamonds weren't worth anything. And believe it or not, a lot of people actually invest in diamonds, the same way someone would invest in gold bullion:
You're scamming people out of money in order to enslave African kids!
Uh, no. Diamonds are a commodity, like gold or silver or platinum or oil or anything else, and lots of people work in those industries. Anything that has value can be acquired and sold to fund people with bad motives. It's just that with diamonds, for some reason people think this is the norm, rather than the exception, when it's not at all. Accusing me of something some asshole warlord did in Africa is like accusing a gas station attendant of being responsible for the war in Iraq because he "sells oil".
Blood diamonds used to be much more of a problem than they are now. However, there are diamond mines in Australia, Canada, and Russia as well, and Canada has a program to certify diamonds as coming from Canadian mines. Also, the whole reason blood diamonds used to be a problem is because diamonds do have value. Otherwise, they'd just be valueless rocks.
Also, for some reason, a lot of westerners seem to think that Africans working in mines are all slaves or that all African countries are extremely corrupt or something. The largest producer of diamonds in Africa is Botswana, and thanks to their state-owned mining company, Botswanans (sp?) have a standard of living that's actually very good for a landlocked African country. Here's a good explanation of how Botswana's diamond industry has grown and changed over the years, and the effects that it's had on Botswana's economy:
How can I get the best quality diamond for my money?
First, buy online, especially if you're in a state that has sales tax. Also, many online retailers will give you a discount if you wire them the money, rather than paying with a credit card. When you pay with a credit card, the retailer doesn't see about 3% of that money, so if you offer to wire money, they might knock 2-3% off of the price. Additionally, we've set up a tool that walks people through the diamond selection process, and explains where you can look for better deals. You can see that here:
Also, you can get higher-quality diamonds for less money if you ask about HPHT diamonds. These are natural diamonds that started off lower quality, but have been treated to make them look better. Most jewelers won't sell these unless you specifically ask about them, since it's considered dishonest to sell them to customers that don't know the difference. Of course, since they cost less, they'll also resell for less, and they'll be harder to sell. You can also buy a center stone online, then have a local jeweler set it in a ring for you.
If you don't want to buy a diamond engagement ring, you don't have to. My company's goal isn't to force people to spend loads of money on diamonds, it's to make the buying process easier and more transparent for people who do want to buy diamonds. But if you want a CZ or moissanite stone instead of a diamond, at least don't get ripped off. CZ costs a few dollars a stone wholesale, tops, and moissanite is maybe $50-$100 a carat, and prices are sure to drop next year, once the patent expires. Check prices on eBay, before some gemstone dealer sells you a stone that's "even better than a diamond" for ten times what it's worth.