The War of Words Between Rapaport and Diamond Foundry

A debate has erupted over synthetics, ethics, and, of course, Leonardo DiCaprio

Earlier this month, Martin Rapaport released a typically impassioned jeremiad against synthetic diamond producers—and Silicon Valley startup Diamond Foundry in particular—which has set off a lively debate on various Facebook pages (including mine).

The article, entitled the “Synthetic Diamond Scam,” castigates lab-grown diamond producers for their current marketing:

It is highly unethical to claim that synthetic diamonds are more ethical than natural diamonds so that you can make more money, while destroying the lives of the poorest and neediest people in the world. Synthetic diamonds are definitely not more ethical than natural fair trade or development diamonds. Those that issue blanket statements and marketing initiatives that claim synthetic diamonds are more ethical than natural diamonds are liars.

He also includes a letter to Foundry backer Leonardo DiCaprio—which strikes similar chords to my open letter to DiCaprio in January.

If lab-grown companies tend to hit the ethical note a lot, that may be because the price differential between naturals and lab-growns is still relatively modest. The ethical argument has become their prime selling point.

Even casting aside the arguments pro or con, this poses risks as a marketing gambit. Lab-grown colored stones were rarely billed as ethical alternatives—just nice gems sold at reasonable price points. This won them eventual (if begrudging) trade acceptance. It’s a little puzzling why this model is not followed by the diamond companies, given the trade sensitivity to these issues.

Rapaport has a second point:

Natural diamonds have consistently served as a store of value for hundreds of years and consumers mistakenly believe the same of synthetics. Consumers have a right to know what they are buying. Do they know that the value of synthetics is unsustainable and that the price they paid will fall sharply in the years ahead?

I have heard this argument a lot lately—and, while I understand its logic, I am not convinced by it.

For one, it presumes that synthetics will become cheaper in the future, as most tech products grow cheaper as technology advances (iPods, etc.). We haven’t seen that happen with lab-grown diamonds. So it is, at least for now, an argument based on a presumption.

At the same time, it also assumes that naturals will hold their value. This is also based on a presumption, including industry-generated supply-demand projections—which, whatever their merit as a theoretical model, have proven wobbly in reality.

Finally, many consumers believe that diamond prices are artificially inflated anyway. That is, as we know, an antiquated perception, but it doesn’t make sense to base your marketing argument on a negative, out-of-date stereotype.

Diamond Foundry responded to Rapaport’s note in an angry way:

There is no basis of fact to assume that lab grown diamonds will be “down at the level of CZ in price or glass crystals…” anytime soon, if ever. Growing diamond crystals the size of a gem in a laboratory is very hard. There is substantive capital expenditure involved for complex semiconductor type equipment. Semiconductor chips have become very inexpensive but due to the higher and higher circuit integration density attained on silicon wafers. The wafers themselves have not been on technology’s Moore curve. By comparison, mined diamonds are free in the ground. If anything, prices for mined diamonds ought to be down to the level of CZ.

It also accused Rapaport of, essentially, being the center of the “diamond cartel”—which, to use a favorite word of Diamond Foundry, strikes me as disingenuous.

The definition of cartel is “an association of manufacturers or suppliers with the purpose of maintaining prices at a high level.” The Rap list is the largely the work of one person, and that person and his list have frequently angered manufacturers and suppliers. That is the opposite of a cartel.

Cartel has a specific meaning in the diamond context, which is likely why Diamond Foundry frequently invokes it. For instance, the company will often say it avoids “cartel-like pricing”—even though, in an interview, Diamond Foundry told me its prices are largely comparable to the natural market’s.

When the Diamond Foundry sent me its initial response, I emailed back, “You guys can do better than that.” It has now responded again, and its CEO’s “Open Letter to Botswana” is indeed better and a little unexpected:

Our company can help Botswana — or any other interested African nation — be a global supplier of diamonds for perpetuity. We are willing to build a diamond foundry in Africa and move diamonds together into the semiconductor age, creating well-paying local high-tech jobs and making the country a leader in clean diamond technology.

This is certainly an intriguing proposal, though it has the whiff of a publicity stunt. For one, it puts the ball in the African governments’ court; there is about as much chance of the Botswanan government reading that letter as there is of DiCaprio reading mine or Rapaport’s. If Diamond Foundry really wants to set up operations in Africa, it should just do it. It can’t hurt, and given that lab-grown diamonds are inevitable regardless, it may be the best we can hope for.

One final point: This dialogue, if overheated at times, is ultimately healthy. (Diamond Foundry will participate on a synthetic panel at the JCK Las Vegas show in June.) But Rapaport and JCK reach a mostly trade audience. Diamond Foundry has recently been the subject of adulatory coverage in Quartz and, just today, on the CBS Morning News. Between the trade press and consumer press, it is far better to have consumer media on your side. If the trade really wants to make its views on these issues known, it needs to do more than just talk to itself.

JCK News Director