I've been in the diamond business for over 10 years. I've traveled all over the world buying and selling diamonds. I've passed through most of the major airports across the United States with about a million dollars worth of diamonds in a leather wallet stuffed inside my pants. I've bought and sold diamonds in Dubai, Mumbai, Moscow, Hong Kong, Paris, Stockholm, Tel Aviv, Madrid and Barcelona. Even today I am involved on the fringe of the diamond business, running a diamond education site helping would-be buyers.
Considering my deep personal involvement in the diamond business, my opinion might surprise you -- diamonds are a terrible waste of your money.
Here are seven reasons why:
1) The most common misconception about engagement rings is that they're some kind of ancient tradition that's deeply embedded in human history in societies around the world. This is completely false. The idea of a diamond engagement ring is roughly a century old. Guess who invented the concept? Not surprisingly, it's the same people who mined the diamonds -- the De Beers diamond syndicate. How far did De Beers go in their quest to create demand for diamonds? Edward Jay Epstein notes in his famous investigative article:
"In its 1947 strategy plan, the advertising agency strongly emphasized a psychological approach. "We are dealing with a problem in mass psychology. We seek to ... strengthen the tradition of the diamond engagement ring -- to make it a psychological necessity capable of competing successfully at the retail level with utility goods and services...." It defined as its target audience "some 70 million people 15 years and over whose opinion we hope to influence in support of our objectives." N. W. Ayer outlined a subtle program that included arranging for lecturers to visit high schools across the country. "All of these lectures revolve around the diamond engagement ring, and are reaching thousands of girls in their assemblies, classes and informal meetings in our leading educational institutions," the agency explained in a memorandum to De Beers."
I have nothing against clever marketing campaigns, but this is different. It's not like with cars, for example. You know you need a car, so the car companies compete for your attention with their ads.
In this case De Beers spent millions upon millions convincing the public that they needed to buy a product that they basically created out of thin air (thin air that they alone controlled).
2) Diamonds are not an investment -- they are a retail product like any other. People explain away spending thousands of dollars on a little stone because they mistakenly believe that the diamond is a solid investment. Are there any other investment classes where the person selling you the asset makes a minimum 10 percent profit margin (usually much more)? Most people would be lucky to get half of what they paid if they tried to sell a ring the day after they bought it. Don't fool yourself into thinking that buying a diamond is a safe place to put away money for a rainy day.
3) The diamond jewelry market is a shark tank. Even consumers that spend hours online learning about diamonds can easily get screwed by one of the many unscrupulous dealers out there (both online and bricks & mortar). There's virtually no end to the various games dealers can play to help them eke out a higher return (and therefore giving you less value).
4) Spending a month's (or two!) salary on something so impractical -- at the exact same time you are beginning your new life together as a budding family -- is a very poor financial decision. I'm not only a very experienced diamond dealer, I'm also a father of six, married for 13 years. The expenses only grow with time, they don't get easier! Believe me, five years later, you'll be wishing you had a spare five grand lying around.
5) Men, you don't need to waste a ton of money to prove your manhood. If Mark Zuckerberg can forgo the diamond engagement ring, then you can too.
6) Women, you don't need your man to waste a ton of money to prove that he loves you.
7) If your man buys you a diamond as a means to keep you quiet for another year about marriage, he probably should be dumped anyway. Find someone more grounded who is excited about building a life together with you -- not someone who's trying to continue being single while taking you along for the ride.
I have consciously left out of this list any arguments about immoral practices in the diamond business (i.e., blood diamonds, unfavorable working conditions, and child labor). The odds of buying an actual blood diamond in developed countries are extremely low. There are checks and balances in place that would make it extremely risky for a dealer to sneak something in illegally.
I don't want to be perceived as hypocritical. If one takes a stance against poor working conditions, then I believe it should be done across the board. I don't believe the diamond business is any more guilty than any other industry that does most of its production in poorer countries on the other side of the world.
Moral issues aside, there are enough reasons not to succumb to the greatest scam in history. If you hang around a group of diamond dealers for a day, there's a word you'll hear passed around quite a bit -- "illusion." As in "I lost my illusion in that diamond." "He wouldn't sell me the diamond at my asking price because he still has tons of illusion in that stone." It's diamond dealer jargon for a projection of high value onto something. When you "lose your illusion" in a diamond, it means you have succumbed to the reality that you will be selling it for less than you had hoped for. When you "have illusion" in a diamond, it means that you still believe you're going to sell it for a great price because it's such a knockout stone.
It's rather amazing that the very people who buy and sell millions of dollars of diamonds a year acknowledge the ephemeral nature of their value at the same time that their lives are completely invested in them.
Ladies and Gentlemen, please take the red pill. Don't believe in the illusion. Pass this article on to your friends. Share it, Like it, Tweet it. Lets start a new movement together.
If you find yourself not being able to fight the social pressure to get a diamond ring, it's OK. There are many like you. It's not a simple thing to resist. Just please do yourself a favor and speak to an expert who can help you make sure that at the very least you spend as little as possible on the illusion and still come away with something that serves its purpose.
Ira Weissman is a diamond industry veteran with a decade of experience at one of the world's largest diamond polishers. He has traveled the world buying and selling diamonds and now dedicates his time to helping consumers make the most of their diamond buying decisions. He has been featured on Anderson Cooper, CNBC, and has been quoted by MarketWatch, The Village Voice, and BankRate. Visit Truth About Diamonds to educate yourself about diamonds.