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Diamonds Aren't Forever · What the Flux

• 0:05
  Speaker 1: This is what the floods.
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  Speaker 2: I'm Larissa and it's Friday, the seventh of August. Here
• 0:09
  Speaker 2: are the three biggest news stories today. For our first story, Telstra,
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  Speaker 2: Australia's biggest talco, could be forced to sell towers across
• 0:16
  Speaker 2: the country, losing its network advantage after the arifl C
• 0:20
  Speaker 2: said it'll investigate making domestic data roaming mandatory. Taalstra's share
• 0:24
  Speaker 2: price fell nearly.
• 0:26
  Speaker 1: Two percent on news.
• 0:27
  Speaker 2: For our next story, met has revealed one of its
• 0:29
  Speaker 2: AI models hacked another company during cybersecurity testing, joining Anthropic
• 0:34
  Speaker 2: and Open AI and reporting similar incidents. One of Meta's
• 0:38
  Speaker 2: most advanced models took advantage of a misconfiguration that accidentally
• 0:42
  Speaker 2: gave it access to the Open Internet. And for our
• 0:45
  Speaker 2: final story, Jetstar, Australia's biggest budget airline, will charge for
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  Speaker 2: overhead luggage space from next February to speed up boarding time.
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  Speaker 2: The moves in line with Ireland's Ryan Air, which has
• 0:55
  Speaker 2: an on time rate that's currently ten percent higher than
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  Speaker 2: Jet Stars. In this series Going Deep, we'll be doing
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  Speaker 2: bite sized explorations into the most interesting industries, businesses, and
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  Speaker 2: economic events in Australia and around the world. For today's episode,
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  Speaker 2: we're looking at the decline and collapse of the global
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  Speaker 2: diamond industry. We've seen de Beer's rack up billions in
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  Speaker 2: losses and lab grown diamonds take over half the engagement
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  Speaker 2: ring market. And this episode we'll explore how a one
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  Speaker 2: hundred and thirty eight year monopoly was built on a
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  Speaker 2: single marketing idea and how a machine the size of
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  Speaker 2: a kitchen appliance is tearing it apart, and what this
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  Speaker 2: means for the countries, the companies, and the couples caught
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  Speaker 2: in the middle. Over to you, Brett and justin.
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  Speaker 1: Thanks Lisa be Man. You know how you walk past
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  Speaker 1: the jewelry store window and there's always that sparkly ring
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  Speaker 1: shining in the window, generally eye wateringly expensive as well. Yes,
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  Speaker 1: that's not an accident. That is nearly a century old
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  Speaker 1: piece of marketing infrastructure, but it's currently being dismantled by
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  Speaker 1: a machine the size of a kitchen appliance. Go on, okay,
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  Speaker 1: so let me break it down for you. In my
• 2:00
  Speaker 1: year eleven chemistry terms, a diamond is just carbon.
• 2:03
  Speaker 3: See on the periodic table.
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  Speaker 1: If I'm not mistaken, it's the same stuff in your pencil,
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  Speaker 1: your barbecue, your tires. Natural diamonds form about one hundred
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  Speaker 1: and fifty kilometers underground under enormous heat and pressure over
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  Speaker 1: roughly one to three billion years.
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  Speaker 3: But in the early.
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  Speaker 1: Twentieth century one company dominated the supply and changed the
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  Speaker 1: marketing of diamonds forever.
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  Speaker 4: The company is called the Beers. It was founded in
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  Speaker 4: eighteen eighty eight in South Africa.
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  Speaker 1: At for most of the twentieth century it controlled somewhere
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  Speaker 1: between eighty and ninety percent of the world's rough diamonds supply.
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  Speaker 1: Genuine monopoly, they had a pretty simple playbook. Restrict supply
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  Speaker 1: of diamonds, stockpile the excess to keep prices artificially high,
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  Speaker 1: and above all else make sure to manufacture demand. In
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  Speaker 1: nineteen thirty eight, De Beers hired a famous American ad
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  Speaker 1: agency with one brief convince people they needed diamonds.
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  Speaker 3: At the time, diamonds were not a standard engagement tradition.
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  Speaker 1: Yet surveys actually showed most women preferred something practical for
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  Speaker 1: their engagement, like a car washing machine, maybe a mattress.
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  Speaker 4: In nineteen forty seven, the slogan a diamond is Forever
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  Speaker 4: became the slogan of diamonds, and it was actually named
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  Speaker 4: the Slogan of the Century. The campaign led to celebrities
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  Speaker 4: and movie stars and royalty wearing diamonds at public events
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  Speaker 4: and then and the.
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  Speaker 1: Goal was to make diamonds synonymous with love, permanence and
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  Speaker 1: of course.
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  Speaker 3: Status, and boy, oh boy, did it work.
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  Speaker 1: In nineteen forty, only ten percent of first time brides
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  Speaker 1: received a diamond ring.
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  Speaker 4: By nineteen ninety that number was eighty percent. And they then,
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  Speaker 4: here's the clever part of it.
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  Speaker 1: For de Beers.
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  Speaker 4: If diamonds are forever, you don't resell it, which means
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  Speaker 4: supply stays controlled, prices stay high. By nineteen thirty nine,
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  Speaker 4: de Beers diamonds oles were sitting nicely at twenty three
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  Speaker 4: million dollars back then, but it grew to its peak
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  Speaker 4: of six point six billion US dollars in twenty twenty two.
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  Speaker 4: So the diamond machine runs perfectly for about eighty years.
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  Speaker 4: And then what happens, Juzzy boy doesn't break your very
• 3:47
  Speaker 4: good friend. Chemistry comes in. Scientists figured out how to
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  Speaker 4: grow chemically identical diamonds in a laboratory YEP.
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  Speaker 1: The result is physically and chemically and optically identical to
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  Speaker 1: a mind diamond standard.
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  Speaker 3: Demologists cannot tell the difference.
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  Speaker 1: Jameis adiber even to Beers had to build its own
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  Speaker 1: detection machines to distinguish between the two, and like all
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  Speaker 1: new technologies, the lab grown diamonds were also expensive at first,
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  Speaker 1: so then the cost of these diamonds collapse.
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  Speaker 4: In fact, the wholesale price of a one carrot lab
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  Speaker 4: diamond fell from about three four hundred bucks in jan
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  Speaker 4: of twenty twenty to under nine hundred bucks at the
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  Speaker 4: end of twenty twenty four.
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  Speaker 1: By twenty twenty six, lab grown diamonds at eighty to
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  Speaker 1: ninety percent cheapart than an equivalent naturally minestone.
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  Speaker 4: And in twenty nineteen, lab grown diamonds were five percent
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  Speaker 4: of diamond jewelry sales in the US.
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  Speaker 1: By twenty twenty five they were closer to fifty two percent.
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  Speaker 4: The retailers are already following the money. Pandora, which is
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  Speaker 4: the world's biggest jewelry brand, dropped natural diamonds entirely and
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  Speaker 4: pivoted to lab grown, and.
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  Speaker 1: Its sales have grown since the switch. So jes boy,
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  Speaker 1: this is where it gets messy for the mining side.
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  Speaker 1: The Beers, the one hundred and thirty seven year old
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  Speaker 1: company inventor of the modern diamond industry, posted a more
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  Speaker 1: than five hundred million dollar loss in twenty twenty five.
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  Speaker 4: Anglo American, which owns eighty five percent of the Beers,
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  Speaker 4: has written the business down by a total of six
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  Speaker 4: point eight billion dollars over three years, and.
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  Speaker 1: They're looking for a buyer and they cannot find a
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  Speaker 1: buyer right now.
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  Speaker 4: Anglo has held talks with luxury houses, Gulf sovereign wealth funds,
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  Speaker 4: African governments, still no buyers.
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  Speaker 3: The Beers is.
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  Speaker 4: Reportedly looking to sell the business at about four to
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  Speaker 4: five billion US dollars, which is less than the right
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  Speaker 4: down's already taken against it.
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  Speaker 1: And they man, it's not just the Beers, Nope.
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  Speaker 4: A Rosa, which is a Russian miner, is the world's
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  Speaker 4: largest diamond miner by volume, and they saw profits fault
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  Speaker 4: nearly eighty percent after sanctions kicked in.
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  Speaker 1: And over the last few years, the Beers has had
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  Speaker 1: over two billion dollars in unsold diamond stockpiles sitting on
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  Speaker 1: their books.
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  Speaker 3: So where do we go from here?
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  Speaker 1: Jasi boy, Well, there are a few possible features and
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  Speaker 1: they all pull in quite different directions. Scenario one, lab
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  Speaker 1: grown becomes mass market, and mined diamonds becomes luxury only.
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  Speaker 4: Natural diamonds reposition as ultra rare collectibles, colored stones, exceptional cuts.
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  Speaker 1: And then the everyday engagement ring is lab grown by default.
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  Speaker 1: Some analysts think this is already happening, but scenario two
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  Speaker 1: is that the floor falls out of natural diamonds complex.
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  Speaker 4: In this scenario, the wedding ring market starts looking more
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  Speaker 4: like consumer electronics, where the product doesn't really hold value.
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  Speaker 3: So where does this all go from here?
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  Speaker 1: Well, the diamond industry's crisis is a story about what
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  Speaker 1: happens when a product's value is almost entirely constructed and
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  Speaker 1: doesn't have inherent value, and.
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  Speaker 4: Then technology figures out how to replicate the physical product itself.
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  Speaker 1: Yeah, de beers didn't sell you a stone, they sold
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  Speaker 1: you a feeling, and a social contract of is how
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  Speaker 1: to prove that a person loves you.
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  Speaker 4: The brutal irony is that lab grown diamonds are as
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  Speaker 4: real as mind diamonds.
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  Speaker 1: So the argument for paying four or five times more
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  Speaker 1: for a natural one is essentially, it took longer to make,
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  Speaker 1: it came from underground. It's more expensive, which appeals to
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  Speaker 1: some people.
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  Speaker 4: And this is where it hits home, Jazzy Boy, if
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  Speaker 4: you bought a diamond engagement ring or received mine, you're
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  Speaker 4: us sitting on an asset that potentially has lost significant value.
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  Speaker 1: Yeah, and mean man. There's also a real human cost
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  Speaker 1: in what's unwrappling.
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  Speaker 4: The economies of Botswana and Namibia and Gola are largely
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  Speaker 4: built around diamond.
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  Speaker 1: Mining, so the slowdown in mind diamonds means job carts,
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  Speaker 1: the production slowdowns and slower royalty revenues as well. But
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  Speaker 1: the truth is and other diamond sellers haven't quite reckoned
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  Speaker 1: with what the future looks like. Yes, so be man.
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  Speaker 1: While they say that diamonds are forever, it turns out
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  Speaker 1: their monopoly wasn't. Flex Sam, We hope you enjoyed our
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  Speaker 1: deep dive into the decline and demise of the mind
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  Speaker 1: diamond industry around the world. On Wednesday, we're going to
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  Speaker 1: be diving into the war between artificial intelligence and the
• 7:18
  Speaker 1: entertainment industry. We know AI can now clone a voice,
• 7:20
  Speaker 1: put a dead actor back on screen, but the question
• 7:23
  Speaker 1: is whether AI can actually replace the thing that makes
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  Speaker 1: music and film matter in the first place. Thanks for
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  Speaker 1: listening and we'll see you on Wednesday.