Diamonds are sort of terrible.
- They have poor a resale value and are therefore not a good store of value or a good investment.
- They are both expensive and over-priced.
- They are brittle and easy to lose.
- They are primarily in demand because of an incredibly successful century-long marketing campaign.
- They are a very complex product and jewelers use their information asymmetry to take advantage of buyers.
- They are mostly controlled by a cartel that artificially constricts supply (collusion) to inflate prices. The cartel is supported primarily by bribing government officials wherever diamonds are found.
- They are often mined by people in pretty terrible situations. And even though some people’s situations might be even worse if they weren’t mining diamonds, the industry might not be something that you want to willingly support.
- They often distract from the meaning that they supposedly symbolize (a couple’s love in the case of a diamond engagement ring).
- Finally, there are many substitutes and near-substitutes for diamonds like other gemstones, moissanite, cubic zirconia, and lab diamonds – each of which don’t have most of these problems.
But even though there are so many reasons not to buy diamonds, you may find yourself in a position where you’re going to get one anyway. This doesn’t make you or your fiancée evil. It just makes you human.
If you are lucky, there may be a diamond in your family that’s not being used. Ask for it. If your diamond is for an engagement ring, then using a family diamond not only adds more meaning to the gift but it’s also a smart financial move – wins for any budding partnership.
You have no control over the diamond cartels, their century of market manipulation, and their consumerist advertising – you’re already screwed there. But if you’re going to buy a diamond, you might as well not get screwed a second time by things you can control.
If this is the position you’re in, check out my other posts here: