The Future of Forever

www.economist.com

Speaking of decaying businesses, The Economist goes deep in search of the current state of the diamond industry:

Natural diamonds—as opposed to the synthetic ones mostly used in industry—were formed more than 1bn years ago deep below cratons, the oldest part of continents. There, between Earth’s core and its crust, the pressure was high enough and the temperature low enough for carbon to crystallise into its hardest form. There diamonds would have remained were it not for molten rock rushing through the mantle and drawing diamonds, garnets and other minerals with it, like a furious river pulling dirt from its banks, before erupting through Earth’s surface faster than the speed of sound.

What a wonderfully descriptive paragraph. Meanwhile, I'm sure most people are aware that the whole concept of a diamond engagement ring started as a marketing ploy dreamed up by De Beers. Still, crazy:

The marketing worked. In 1939, 10% of American brides received a diamond engagement ring. By the end of the century 80% did. The result was a unique industry, controlled by a single company that was both marketer and miner, a capital-intensive business built on an ephemeral link to love, its success due to strangled supply and inflated demand.

But the times they are a-changin':

But a long-term risk looms over the industry: one day young couples may no longer want diamonds at all. They are a “Veblen good”, as items that gain their value solely from their ability to signal status are named, after Thorstein Veblen, an economist who wrote about the spending of the rich. For Veblen goods, the normal law of supply and demand does not hold: higher prices support demand, rather than suppressing it. If a big gap opens up between the number of diamonds offered for sale and the number of people willing to buy them at high prices, diamonds could suffer a big, sustained fall in value and the entire business could cease to make sense.

This seems almost certain to happen, it's just a matter of when. 💎💍

Read more...
Linkedin

Want to receive more content like this in your inbox?