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- Sep 2, 2002
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I am hoping some of you make it to the end of my post below. In some ways it may be the most important post I can offer from my chair here in the world’s diamond capital.
What makes a diamond valuable?
Research online and walk into any jewelry-store and everybody, everywhere mimics the same answers: “The value of a diamond is determined by the 4 Cs: Color, Clarity, Carat-weight and Cut.”
Really? Were those things what you were excited about when first imagining your dream diamond? Or were you only introduced to concepts like VS/VVS and D/E color by some jeweler or tutorial?
We must ask, where did the 4Cs notion originate? Easy. The sales and marketing of diamonds was dominated by De Beers’ for over a century. And remember that De Beers’ main business is rough diamonds. As a result, the company dominating the marketing of diamonds was most interested in maximizing the value of their own rough diamonds. They were unconcerned with what came after.
And indeed, miners today still sort their output with Color, Clarity and Carat-yield foremost in mind. By the way, did you know that for miners “Cut” has nothing to do with sparkle? It refers to shape. So it’s no coincidence that for a long time, and still now, many professionals still refer to shape as cut. And it is no coincidence that many labs (including GIA until 2006) did not even bother to grade cut-quality. And it is no coincidence that the biggest labs continue to give the miners wide latitude with their so-called “cut” grades.
We must then ask: Is the current 4Cs method of valuation valid? Clearly it is from the point of the miners. But is it valid from the point of view of consumers?
If we follow the marketing of the past century it would seem to be. Most diamond sellers (online and showroom) continue to educate clients that value is primarily based on graduating color, clarity and carat-weight. They continue to educate that a diamond some miners sold as VVS1 rough has more value than a diamond they sold as VVS2 rough. That E has more value than F.
How does that translate to consumers though?
With color, every one-grade-up means a price increase of 8-10%. But who can really see the difference? Color-grading is a continuous discussion-point between traders and very rarely do 4 professionals arrive at the same conclusion about the color of a finished stone. But for the miners who sell rough before it’s ever cut, having this system brings millions in profits when they sell something they can argue to be “D” rather than “E” or “F” (etc.), regardless of the fact that several colors may look practically the same when mounted and sold to consumers.
With clarity, even more-so. Each clarity-grade up represents a price increase of 10%. Yet there are 7 grades which may be eye-clean. For the top 3 most professionals need a microscope to determine it, and they may argue about the final grade. But by using this system the miners increase their own profits by millions of dollars for incremental differences that make no visible difference to consumers. And because of a century of marketing, jewelers and consumers swallow the idea there should be some premium for VVS1 over VVS2.
I must ask: If we just discovered diamonds today, and you were asked to design a valuation system, would you vote to pay for 7 steps of price increases between diamonds that look practically the same when mounted and sold?
Carat weight requires a bit more attention. A given rough diamond can, for instance, yield a reasonable cut-quality 1.00 carat diamond or a fantastic cut-quality 0.92 carat. In nearly all cases the 1.00 will fetch a better total price. This is due to weight based price increases that come with marketing perceptions: 1.00 carat is “better” than 0.92. The success of that marketing even drives up the price of that rough. The miners will say “We know you can make 1.00 carat from this rough” and will uphold such a price. They don’t care about diameter, or edge-to-edge brightness possible if the rough were crafted into a fantastic 0.92 carat diamond instead. There is no consideration for sparkle or optical precision which might come later. The miners just say “We know you can make 1.00 carat GIA EX from this” and uphold the price.
Indeed, where is Cut-quality in this? Barely anywhere. The “quality” aspect has only recently begun to take the position of the 4th C. For many pros the word cut still means shape, not Cut-quality. In fact shape is still the 4th C for fancy shaped diamonds, since labs do not grade their Cut-quality.
The grading-systems are probably the most telling. GIA, being the most influential, has a top “Excellent” grade for round brilliants which 60% of the diamonds they grade will fetch. We all know how many different looks and performances can be graded GIA “EX,” easily seen with the naked eye. But in comparison the 5 top-grades in Color and in Clarity are close to impossible to tell apart with the naked eye.
Is this in-line with your first notions? When you first determined to buy a diamond, what aspects did you imagine? What brought you joy when you pictured it in your mind?
Given that the joy for most consumers, purchasing and/or wearing a diamond, is directly related to what they can see, I totally disagree with the notion that the value of a diamond is determined by the 4 Cs. I find that system of arguable nuance to be century-old brainwashing by DeBeers’ and the miners. In fact, whomever follows the 4 Cs as a determiner of value should understand that they are essentially buying a rough diamond, not a polished diamond.
I understand this post might be provocative. I am hoping that it may serve as the beginning of an interesting discussion.
Live long,
What makes a diamond valuable?
Research online and walk into any jewelry-store and everybody, everywhere mimics the same answers: “The value of a diamond is determined by the 4 Cs: Color, Clarity, Carat-weight and Cut.”
Really? Were those things what you were excited about when first imagining your dream diamond? Or were you only introduced to concepts like VS/VVS and D/E color by some jeweler or tutorial?
We must ask, where did the 4Cs notion originate? Easy. The sales and marketing of diamonds was dominated by De Beers’ for over a century. And remember that De Beers’ main business is rough diamonds. As a result, the company dominating the marketing of diamonds was most interested in maximizing the value of their own rough diamonds. They were unconcerned with what came after.
And indeed, miners today still sort their output with Color, Clarity and Carat-yield foremost in mind. By the way, did you know that for miners “Cut” has nothing to do with sparkle? It refers to shape. So it’s no coincidence that for a long time, and still now, many professionals still refer to shape as cut. And it is no coincidence that many labs (including GIA until 2006) did not even bother to grade cut-quality. And it is no coincidence that the biggest labs continue to give the miners wide latitude with their so-called “cut” grades.
We must then ask: Is the current 4Cs method of valuation valid? Clearly it is from the point of the miners. But is it valid from the point of view of consumers?
If we follow the marketing of the past century it would seem to be. Most diamond sellers (online and showroom) continue to educate clients that value is primarily based on graduating color, clarity and carat-weight. They continue to educate that a diamond some miners sold as VVS1 rough has more value than a diamond they sold as VVS2 rough. That E has more value than F.
How does that translate to consumers though?
With color, every one-grade-up means a price increase of 8-10%. But who can really see the difference? Color-grading is a continuous discussion-point between traders and very rarely do 4 professionals arrive at the same conclusion about the color of a finished stone. But for the miners who sell rough before it’s ever cut, having this system brings millions in profits when they sell something they can argue to be “D” rather than “E” or “F” (etc.), regardless of the fact that several colors may look practically the same when mounted and sold to consumers.
With clarity, even more-so. Each clarity-grade up represents a price increase of 10%. Yet there are 7 grades which may be eye-clean. For the top 3 most professionals need a microscope to determine it, and they may argue about the final grade. But by using this system the miners increase their own profits by millions of dollars for incremental differences that make no visible difference to consumers. And because of a century of marketing, jewelers and consumers swallow the idea there should be some premium for VVS1 over VVS2.
I must ask: If we just discovered diamonds today, and you were asked to design a valuation system, would you vote to pay for 7 steps of price increases between diamonds that look practically the same when mounted and sold?
Carat weight requires a bit more attention. A given rough diamond can, for instance, yield a reasonable cut-quality 1.00 carat diamond or a fantastic cut-quality 0.92 carat. In nearly all cases the 1.00 will fetch a better total price. This is due to weight based price increases that come with marketing perceptions: 1.00 carat is “better” than 0.92. The success of that marketing even drives up the price of that rough. The miners will say “We know you can make 1.00 carat from this rough” and will uphold such a price. They don’t care about diameter, or edge-to-edge brightness possible if the rough were crafted into a fantastic 0.92 carat diamond instead. There is no consideration for sparkle or optical precision which might come later. The miners just say “We know you can make 1.00 carat GIA EX from this” and uphold the price.
Indeed, where is Cut-quality in this? Barely anywhere. The “quality” aspect has only recently begun to take the position of the 4th C. For many pros the word cut still means shape, not Cut-quality. In fact shape is still the 4th C for fancy shaped diamonds, since labs do not grade their Cut-quality.
The grading-systems are probably the most telling. GIA, being the most influential, has a top “Excellent” grade for round brilliants which 60% of the diamonds they grade will fetch. We all know how many different looks and performances can be graded GIA “EX,” easily seen with the naked eye. But in comparison the 5 top-grades in Color and in Clarity are close to impossible to tell apart with the naked eye.
Is this in-line with your first notions? When you first determined to buy a diamond, what aspects did you imagine? What brought you joy when you pictured it in your mind?
Given that the joy for most consumers, purchasing and/or wearing a diamond, is directly related to what they can see, I totally disagree with the notion that the value of a diamond is determined by the 4 Cs. I find that system of arguable nuance to be century-old brainwashing by DeBeers’ and the miners. In fact, whomever follows the 4 Cs as a determiner of value should understand that they are essentially buying a rough diamond, not a polished diamond.
I understand this post might be provocative. I am hoping that it may serve as the beginning of an interesting discussion.
Live long,
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