Explained (2018–…): Season 2, Episode 10 - Diamonds - full transcript

I'm planning on proposing
to my boyfriend, uh, shortly.

The weeks leading up to that
are, like, the most stressful,

nerve-wracking.

You know when you get to the point
that you, like...

All you can hear is, like,
badum, badum, badum.

He got down on one knee,
and pulled this box out of his pocket,

- which I had no idea was there.
- [both laugh]

And he's like,
"Well, I wanna be with you forever."

And everything went black and disappeared,

and I was in this space with him,
and my knees were weak.

[Cleo Abram] You probably know
what they bought.



Diamonds are the world's
most popular gemstone.

But if you compare them to other jewels,
it's not obvious why.

These are just as sparkly as a diamond.

These look indistinguishable
from diamonds.

One of these is a man-made diamond.

Scientists can now
create diamonds in a lab

that are structurally identical
to diamonds mined from the earth.

And yet, every year,

people spend their savings
to buy the real thing.

It is the single most expensive thing
that either one of us has purchased.

It was the most beautiful
and most significant thing ever to me.

Somebody that can afford to give you
nice diamond, no? It's nice.

So what exactly
makes these rocks so special?

What is the value of a diamond?



[woman] Diamonds, forged by nature
and crafted by man.

[man] It may be a cliché
to say that this is "rich soil,"

but this time, it's literally true.

It's beautiful. And he designed it.

Make sure it stays on that finger.

Of course.

[man] It's not a purchase that's logical.
It's supposed to be illogical.

It's not rational.

[woman] They just seem representative
of these terrible things.

It's like this waste of money,

and we're only doing it
to show other people.

[man] What do people want?
How much do they want it?

What are they willing to pay for it?

[Abram] We all live on a thin, solid crust

above hot molten metal soup.

That crust is typically less than
40 kilometers deep,

just twice the length of Manhattan.

Rubies, sapphires, emeralds...
These all form there.

But a diamond's home is deeper.

Scientists measure pressure in pascals,

and where diamonds form,
pressures are five to six gigapascals.

If you think of 80 elephants
standing on your big toe,

that is the pressure that is equivalent
to five to six gigapascals.

Every other precious gem
is made up of combinations of elements.

A diamond? Only one. Carbon.

From a scientific perspective,

the most important part
of a diamond is this.

[Smit] These are small pieces
of the mantle

that's been trapped during diamond growth,

and so these inclusions
are actually the only direct samples

that scientists have
to study the deep earth.

[Abram] And those inclusions
can be dated.

If this is all of human history,
and this is the time of the dinosaurs,

this is the period when all the diamonds
we see today were born.

The oldest diamonds that have been dated
actually predate life on Earth.

Over 25 million years ago,

diamonds blasted to the surface
in rare and violent explosions.

In the most seismically active regions,
they just evaporated.

In the more stable areas, they survived.

This is a map of seismic waves
through the Earth.

The most stable areas are the pink ones.

And that's where diamonds lay unnoticed
for millions of years.

The earliest piece
of surviving diamond jewelry

is this ring made around 300 B.C.

Over the next 2,000 years,

diamonds popped up
in crowns, rings, and pins

alongside other precious gems.

And sometimes they were wedding gifts,

like the diamond ring
exchanged in the betrothal

of Archduke Maximilian of Austria
and Mary of Burgundy.

But diamonds wouldn't become
the unrivaled gemstone of love

until these diamond deposits
were discovered in South Africa

400 years later.

Enter Cecil Rhodes, a British 17-year-old
sent to South Africa,

then Cape Colony.

He would one day be remembered
as a colonizer of Rhodesia,

now Zimbabwe and Zambia,
the namesake of Rhodes University,

the creator of the Rhodes Scholarship,

a zealous imperialist,

and the founder of the company
that would dominate the diamond industry

for more than a century... De Beers.

Under its watch, diamonds transformed
from a gem like any other

into a cultural touchstone.

To understand how they pulled that off,
you have to learn the De Beers' playbook.

The first play... control supply.

In the 1870s, Rhodes
started buying up his competitors.

I think it's important to understand

De Beers didn't necessarily produce
all of the diamonds in the world.

They produced a lot of the diamonds.
They bought supply from other producers,

and this allowed them
to basically control supply.

Around 90% of the world's supply
within two decades.

Then came the second play.

Rhodes made a deal
to sell his entire supply of diamonds

to an exclusive diamond syndicate
in London.

When De Beers had control of
global supply under the monopoly,

they had a strategic stockpile.

And in situations where,
um, you know, demand would decline,

they would hold back supply to market
as they saw fit.

De Beers never released information
about its stockpile

and claims they no longer have one.

But in 1999, The New York Times
pegged it at 5.2 billion.

In the 1940s, the U.S. government
tried to build its own diamond stockpile,

because diamonds aren't just for jewelry.

They're also the hardest-known
natural material on Earth,

which makes them crucial

for manufacturing weapons,
tanks, and airplanes.

And while ultimately,
the War Production Board

said no piece of equipment was delayed,

a government official
claimed the De Beers-led syndicate

was making getting diamonds so difficult

that the U.S. had to threaten
to "not give planes to England

if the syndicate did not sell us
the diamonds to make them."

The reason? "The diamond syndicate
will not sell us a stockpile

because it will not tolerate large stocks
outside its monopoly control."

But maintaining the price of something
isn't just about supply.

It's also about demand.

The decade before World War II,
De Beers was in crisis.

It was the Great Depression,

and there weren't many people
shopping for diamonds.

Worse, people might sell
the diamonds they had bought,

increasing the supply
and further driving down the price.

So De Beers has hired an advertising firm
which came up with a brilliant idea.

What if people kept diamonds... forever?

Certainly the famous slogan
"A diamond is forever."

It's probably one of the most successful
advertising campaigns

in advertising history.

Rings had been a common engagement gift
since the early Middle Ages,

but the idea that a diamond
should be on that ring? That was new.

The first campaign ran in the U.S.

with paintings
by some of the world's biggest artists.

On the right, that's by Salvador Dali.

On the left, Pablo Picasso.

The message was,
"Diamonds are works of art."

Many campaigns followed,
all with that same slogan.

[man] A diamond anniversary band.

On your tenth,
show her you'd marry her all over again.

[Abram] It worked.

In the 1939 classic, Gone With The Wind,

Scarlett O'Hara
pleads for this precious gem.

What kind of ring
would you like, my darling?

Oh, a diamond ring.
And do buy a great big one, Rhett.

But she'd have been one of only
10% of American brides

who received a diamond ring that year.

By the 1950s...

♪ But square-cut or pear-shaped ♪

♪ These rocks don't lose their shape ♪

...diamonds were a girl's best friend.

And by 1990,
80% of American brides got one.

And if a diamond is forever,
most people don't want a used one.

There's no official price scale
for second-hand diamonds, but...

I think you would be stunned

by how little you would get

as-as a percent of what you paid.

You might get 25%
of your purchase price, 30%.

The campaign was such a hit,
De Beers ran it again.

This time in Japan.

- [man speaks Japanese]
- [speaks Japanese]

[man speaks Japanese]

In 1967, when that campaign began,

almost no Japanese brides
received a diamond.

Twenty years later, over 70% of them did.

In the 1990s, De Beers turned to China.
Same slogan...

[man speaking Chinese]

- [Abram] Same result.
- [man] De Beers.

These ads are trying to create demand,
and that's not some dirty trick.

That's capitalism.

I can convince you
that you actually want to buy a pet rock,

which, to me, was, like,
the dumbest idea in the world,

but people were able to be convinced
you should value this pet rock.

That's why ad companies
get paid what they get paid.

De Beers was just remarkably good at this.

But not all De Beers' efforts
have been successful.

In the 1980s, De Beers tried to get women
to buy diamonds for men.

That one didn't stick. De Beers
tried again to get women to buy diamonds

in a 2003 campaign called,
"Raise Your Right Hand,"

with the idea being
that an empowered woman

would have an engagement ring
on her left hand

and a diamond ring she bought herself
on her right.

That one didn't take off, either.

Diamonds may be worn by women,

but the primary consumers of diamonds
are men.

For a few years,
De Beers commissioned surveys.

One question asked
if you'd want a diamond ring

if it meant forgoing other things.

In 1990, only 22% of women said yes,

but for men, it was 59%.

Many men reported that
buying a diamond engagement ring

was a mark of adulthood.

I think it is, in some ways,
a symbol that I've arrived,

and I'm able to make
such a significant purchase

and kind of take this step.

This set the stage
for De Beers' next play...

Linking the amount
a man spent on a diamond

to his professional success.

It's become a cultural norm
in the United States.

The rule of thumb... diamonds
should be about two months' salary.

- Two months' salary.
- Two months' salary.

De Beers came up with that.
In Japan, they came up with three months.

That link between diamonds
and a man's professional success

grew in a way that De Beers
may not have anticipated.

And rappers started name-dropping
their favorite jeweler.

♪ You are the Jacob ♪

- ♪ Jacob ♪
- ♪ Jacob ♪

♪ Jacob the Jeweler ♪

My nickname is Jacob the Jeweler.

♪ All these diamonds on my wrists ♪

♪ All these diamonds on my wrists ♪

How much value we have here?
I would say, um...

about 35 million.

I have put diamonds on almost everything.

I think I once made a toothbrush
in diamonds and gold.

It's a sign of success.
Like you would say, "Honey, I love you.

And this is how much I love you.
This is how big I love you."

This is a 75-carat, uh... vivid yellow.

Carat, color.
What he's talking about was another play.

Number five... define value.

If you walk into any diamond store today,
they'll probably tell you about the 4Cs.

The 4Cs are the four most important
characteristics of a diamond.

They represent
cut, color, clarity and carat weight,

which is the size of your diamond.

A diamond should be cut
not too flat, not too deep.

It should be either colorless
or a bright color, but not in between.

It should be clear, free of the inclusions
that scientists love.

And it should be big.

That system for grading diamonds
was invented in the 1940s

by a gem research institute.

They started selling certificates.

I think that everybody feels very assured
when they get some kind of certificate

and some kind of, um, understanding
of-of where their diamond lands,

in terms of the grading system.

De Beers promoted the 4C system,
helping it take off.

Conveniently, a lot of their diamonds
were big and clear.

And demand for them kept going up.

But in countries where diamonds are mined,

that demand sometimes meant
funding for conflict.

Between 1992 and 1998,

a rebel group in Angola

raised more than $3.7 billion
from diamond sales,

fueling a war that killed
at least half a million Angolans.

Diamond sales also helped fund conflicts
in Sierra Leone,

the Ivory Coast, and Liberia.

Eventually, this drew
international attention and backlash.

- Blood diamonds.
- Blood diamonds.

- Blood diamonds.
- So-called "blood diamonds."

But in the U.S., the demand for diamonds
remained pretty much the same.

And while there is now
a certification system

to try to stop the sale of diamonds
smuggled from conflict zones,

no one knows for sure
how well it's worked,

because the diamond supply chain
is incredibly opaque.

I think it's difficult if you don't have
any paperwork with the diamond

to really fully understand
where it came from.

But around the same time
that blood diamonds were making headlines,

De Beers and its playbook faced
its biggest threat yet... real competition.

I think most people think
that all diamonds come from Africa,

but it's actually important to understand

Russia's the largest supplier
of diamonds in the world.

For decades,
De Beers had an exclusive deal

to buy most of
the Soviet Union's diamonds.

But when the Soviet Union collapsed,
so did the deal.

Then, in 2005,
De Beers settled an antitrust lawsuit

that had accused them of a conspiracy
to fix the price of diamonds.

De Beers agreed to pay $295 million
back to American consumers.

And in a separate case
with the U.S. government,

De Beers plead guilty to price-fixing.

De Beers' market share began to go down.

But something strange happened.
The price of diamonds didn't.

De Beers is no longer the biggest player,

but diamond companies
still look to their playbook.

Alrosa is, uh, the largest producer
of diamonds worldwide.

We have about a 27% market share,

which means that
one out of every four diamonds

is an Alrosa diamond.

The top three producers... De Beers,
um, Russia's Alrosa, and Rio Tinto...

None of them actually manage
a strategic stockpile

the way that De Beers did
during the monopoly era,

um, but they will, you know,
withhold goods, uh, from the market

if they feel
there isn't substantial demand.

[woman] How do you think
about stockpiling diamonds,

and how does the industry make sure

that there aren't too many diamonds
on the market

in such a way
that would cause the price to go down?

Yeah. There's a-there's a party line

that I'm supposed to say about that,
which, uh...

[both laugh]

Sometimes, of course,
there's more supply than demand,

um, and, uh, certainly when that happens,

we don't look to reduce pricing

because we don't want to jeopardize
the inherent value of the diamond

or what ultimately the consumer
is going to be purchasing.

At this point, I can't really imagine

who is incentivized
to have the price fall.

And that even includes consumers.

[Spriggs] If I offer you
a bottle of red wine,

and I say one of them cost $75
and one of them cost $20,

if you know a lot about wine,

you may look at the labels,
you may taste them,

and if you're really good,
you may be able to tell me

this $25 bottle of wine
is really the better wine.

Most people don't have that ability.
They're gonna give me the $75.

That creates this perverse setting

in which if I raise the price,
instead of the quantity demand falling,

I can actually see the quantity go up.

They're called Veblen goods,

and they're a unique good

in which the price itself
is interpreted by people as a signal.

Other famous Veblen goods
include Birkin bags,

Cristal champagne and lawyers.

I do think that there is
an aspirational quality to diamonds,

where the price, the fact that
it is expensive, adds desire.

Because it's-it's a sense of arriving,
it's a sense of aspiration.

And it means that people
will pay top dollar for them,

even if an option exists
that's structurally identical.

The structure of a diamond is simple.

All carbon atoms, each one
forming four bonds with its neighbors.

In graphite, also all carbon,
atoms form three bonds.

And that tiny difference is why graphite
is soft enough to be a pencil,

and why diamonds are so hard,
they can only be cut by another diamond.

We actually first figured out how to
make diamonds in a lab back in the 1950s.

I twiddled around a little bit
and saw the sparkles.

My knees weakened. I had to sit down.

That's scientist Tracy Hall
in an interview with the BBC

describing the moment he and his team

became the first to consistently
and publicly create a diamond in 1954.

And at that instant, I knew that man

had finally turned graphite into diamond.

And today, we can pump
gem-quality stones out of machines.

There are two completely separate ways
to grow a diamond.

High-pressure, high-temperature
diamond growth

is recreating the conditions in nature

with which carbon
crystallizes into diamond.

Chemical vapor deposition
is a methodology to grow diamonds

where hydrocarbon gases
are injected into a growth chamber,

and microwave plasma energy

is used to break apart the bonds
of that hydrocarbon,

allowing free carbon atoms
to rain down on a plate of diamond,

and atom by atom,
grow that diamond vertically,

resulting in extraordinarily high-purity,
high-quality diamonds.

A diamond is a diamond, regardless
of whether it's made in a lab

or whether it comes from the earth.

Take a guess.
Which of these is lab-grown?

You definitely couldn't tell.

It takes very specialized
laboratory equipment

to detect the minute differences,
uh, between the two products.

And as lab-grown diamonds
have gotten better,

they've also gotten cheaper,

which brings us to number seven
in the playbook...

If you can't beat 'em, join 'em.

In 2016, De Beers and its peers
in the natural-diamond industries

slapped back against lab-grown diamonds

with an ad campaign called "Real Is Rare."

[woman] It will be kind,
and it will be real.

[Abram] But then in 2018,

De Beers actually launched their own
lab-grown diamond line

at the lowest prices on the market.

They claim that's how much they're worth
since they're mass-produced.

But some say this is a strategy
to make lab-grown diamonds seem worse.

The efforts of De Beers

to price light-box diamonds
at such a low price point

are a very clear effort
to denigrate the product.

Laboratory-grown diamonds
are superior to dirt diamonds

or mined diamonds
that have come out of the earth.

But lab-grown diamond companies
are capitalizing on the lasting connection

between diamonds and love.

As someone who's in the business
of selling diamonds,

I like the connection.

A connection they owe to De Beers.

The lab-created producers
want to market their product

as a more innovative

and environmentally friendly,
um, you know, product

that's superior to natural diamonds
in those ways.

But at the same time, they still want
the value associated with diamonds

that, you know, that
De Beers created over a hundred years.

The narrative is what a lot of purchasers

might feel on some level
is like the bullshit, right?

Like, "They-They told us this story
that, you know, you got to do this,

and this is, like, how you prove love."

I think the thing is, though,

that, uh, there's something
really, really deeply touching

about doing this for somebody,

about wanting to be very public
about how you feel about somebody.

And in a way, uh, burning a pile of money

is a pretty compelling argument

that you feel what you say you feel.

Just because the connection
between diamonds and love

was manufactured by marketing,
that doesn't make it less real.

It was the most beautiful
and most significant thing ever to me,

not because it's a diamond,
but because he's my best friend.

He was like, "This was my mom's diamond."

That's when I really started crying.

When you put it into perspective
that an ad campaign drove,

you know, what we now consider,
like, the step to getting married,

you have to buy a diamond,
it's kind of infuriating to think about,

but at the same time,
it makes-it makes sense.

Like, I didn't come up with this.
This is just the-the world's standard.

A diamond is a product of heat,

time, capitalism, and us.

It isn't bullshit,

because the volume of people

who kind of are convinced by it

tells us that their story

is tapping into this complexity
of who we are.

And when you think about it,
so much of what we do,

so much of what we wear,
you know, what we carry.

So-So much of it
is about communicating who we are.

Here's my diamond.
It's absolutely stunning, in my opinion.

What do people want?

Uh, how much do they want it?

What are they willing to pay for it?

The question becomes more,
"How do you value different things?"

And I think diamonds are a little bit of,
uh... they're kind of like an ink-blot test,

and you can kind of see what you want
and make your own criteria

in terms of what's
the most important to you.

He's my everything, and...

through thick and thin,

and that just meant the world to me
when he gave me this ring.

- I love seeing it on your hand.
- I know. I love seeing it on my hand, too.

[laughs]

Thank you.

I think the value of a diamond is zero.

It's entirely the value you have,

uh, in regards to the person
who gave it to you.

[closing music playing]