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The Diamond Invention by Edward Jay Epstein

The Diamond Invention is the author’s investigation into the invented market of diamonds. The investigation was conducted, at least in part, in 1978. The book was first published in 1982.

The author covers some history of diamond mining and trading, as well as how the De Beers obtained and maintain their monopoly by controlling not only the mines but also the cutting and distribution of diamonds. When competitors or potential competitors emerge, they buy them out and/or gain control through corporate maneuvering.

The text is organized into a prologue and 22 chapters with endnotes that mention the sources or sometimes serve as a vague description of each chapter. With most chapters between three thousand and four thousand words, the book is short and can be easily digested.

Below are a few interesting points, not intended to be a summary.

  • Although diamonds were rare, the discovery of large diamond mines in South Africa would potentially drop whatever perceived value it had.

  • British financiers (De Beers) took control of all aspects of diamond mining and trading to maintain the prices, operating under the name of Diamond Trading Company in London.

  • In post-WWII Japan, there was a campaign to convince the Japanese to go back on their traditions regarding marriage and adopt the western approach of having diamond rings.

  • De Beers had a “treaty” with the Soviet Union for trading diamonds. The Soviet Union supplied gems and received industrial-grade diamonds in return.

  • The value of a diamond is not merely based on weight but also its shape and color, and can therefore vary greatly. The price is in effect set by the De Beers. It does not have the standardization that precious metals like gold and silver have.

  • The masses are conditioned to think that “diamonds are forever”, not to be resold and that their prices remain more-or-less constant.

  • In order to control the market, the De Beers also control the diamond cutters and distributors by being their sole supplier and as well selecting which diamonds to give them.

  • Cecil Rhodes arrived in South Africa in September 1870 due to a health condition. He apparently had the ambition to rebuild the English empire. He initially joined the so-called diamond rush on land that had been owned by the De Beers. Although that didn’t work out, he instead invested in a steam water pump to aid mining, thereby acquiring a monopoly on that. Using those profits, he bought and consolidated mining businesses. His main mining competitor was Barney Barnato and, with the support of bankers such as the Rothschilds, eventually bought his operation. (Chapter 7)

  • Before South Africa, diamonds came exclusively from India, which Jewish traders had access. Later with trade done by sea routes, Jewish businesses still controlled the diamond traffic. Dunkelsbuhler, one of the companies involved with Rhodes, employed Louis and Ernest Oppenheimer. During WWI, the latter set up the Anglo-American Corporation (a deliberately western-friendly sounding name) to protect German investors of gold in South Africa, later using this entity to acquire control of the De Beers. Despite the depression and WWII, control was maintained by supplying industrial diamonds which are necessarily in tooling. (Chapter 8)

  • In 1940, the US requested a large supply of industrial diamonds for the war effort. Initially, the De Beers rejected the proposal as it did not want to lose control of a large stockpile and therefore the market. The US then threatened to stop providing planes to the UK necessary for her defense (which would include defending the stockpile of diamonds in the country). De Beers then agreed to a highly compromised deal. (Chapter 9)

  • During the war, the price of diamonds per carat remained the same. However, the US received lower-quality diamonds and therefore required more of them for industrial purposes. In effect, the price was raised 60%. (Chapter 9)

  • The DOJ, with the cooperation of the War Production Board and the OSS, investigated the diamond monopoly. It found that tons of diamonds were somehow supplied to Nazi Germany, thereby aiding their war effort. (Chapter 9)

  • In 1939, the De Beers authorized advertising agency N.W. Ayer to begin a campaign in the US to advance not a specific product but to “cultivate” the connection between diamonds and romance. This included approaching Hollywood and inserting scenes into films that involve the star wearing diamonds or purchasing diamonds, as well as articles in newspapers and magazines that subtly sell the idea. The agency invented “A Diamond Is Forever”. In the 1960s, this campaign was expanded to other countries, including Japan, Germany and Brazil. (Chapter 13)

  • In the 1950s, diamond smuggling was a problem for the De Beers. Oppenheimer hired Percy Sillitoe, former head of MI-5, to establish what was in effect their own intelligence network to trace and track smugglers and buy back the diamonds.

  • Despite the capability to produce synthetic diamonds, the De Beers has enough control of the parties involved to maintain its monopoly. Also, any party that can manufacture diamonds doesn’t want to crash the market anyway, thereby driving down the value of the thing they are making.

  • Diamonds “retain” their value as long as owners don’t try to sell them. Retailers generally do not buy them back and dealers offer prices that are significantly lower than what the buyer paid for.

The author concludes:

The diamond invention is neither eternal nor self-perpetuating. It survived for the past half century because two critical conditions were satisfied: the production of diamonds from the world’s mines was kept in balance with world consumption; and the public refrained from attempting to sell its inventory back onto the market. De Beers satisfied the first of these conditions by owning and controlling the major sources of diamonds and the second of these conditions by fostering the illusion in the public’s mind that diamonds are forever. Both achievements may prove to be temporary phenomena.

The book is freely available at the author’s website:


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