Are Diamonds a Waste of Money?

We’ve all seen pieces like “7 Reasons Why Diamonds Are a Waste of Your Money,” over the years, but one that recently appeared in the Huffington Post has stirred up a little more fuss, as it was written by Ira Weissman, a diamond dealer who also runs a gem information and referral site.

Ira seems like a nice guy, but obviously the piece raised questions, coming from someone who depends on the industry for his livelihood. I asked him why he wrote what he did, and here is his response:

I simply felt that saying what I did would get a strong response both from those who support what I wrote and those who oppose it, and it looks like I was correct.…

I think it will greatly help my business. This isn’t the first time I’ve said these things (see here.) I think people are much more willing to take advice from those who recognize the illusion than from those who still exist within the illusion. 

I have no illusions (sorry to overuse that word!) of grandeur that I’m actually going to change anybody’s mind on the subject. But perhaps I will convince some guys to approach their purchase very practically instead of emotionally. And if that’s the case, then I might have acquired some more customers.

As customer acquisition strategies go, it’s a novel approach. But the arguments here should be looked at, and not just because they are coming from “within the family.” They are shared by many people, who see diamonds, particularly engagement rings, as something they are forced to buy. 

So, let’s look at the some of the arguments, which I urge everyone to read in context:

The most common misconception about engagement rings is that they’re some kind of ancient tradition that’s deeply embedded in human history in societies around the world. This is completely false. 

Having just spoken to a marriage historian, I can tell you that the engagement ring tradition is actually pretty old. This magazine wrote about them in the 1920s; De Beers started its ad campaign a decade later. What De Beers popularized was diamond engagement rings. 

But to the larger point, people use objects to express feelings. Diamonds have taken their place as one of those objects, along with flowers, wedding rings, and fancy dinners. And yes, that’s because of marketing. However, people have pitched other objects as romantic tokens, and it hasn’t always worked, just as many diamond marketing schemes have failed. Diamond engagement rings have also remained popular even though post-cartel De Beers has barely spent a cent promoting them in the last few years. So while marketing is the main driver here, it’s marketing that has struck a chord. 

Diamonds are not an investment—they are a retail product like any other. People explain away spending thousands of dollars on a little stone because they mistakenly believe that the diamond is a solid investment. 

I am not sure the “solid investment” idea motivates many purchasing decisions. And while I am pretty hesitant to recommend diamonds as an investment, diamonds and jewelry probably hold their value better than other objects, as evidenced by all the people who have done quite well selling their gold jewelry in the last few years. Diamonds can also become heirlooms; it is a little harder to pass down your MacBook to your grandkids.

Spending a month’s (or two!) salary on something so impractical—at the exact same time you are beginning your new life together as a budding family—is a very poor financial decision. I’m not only a very experienced diamond dealer, I’m also a father of six, married for 13 years. The expenses only grow with time, they don’t get easier! Believe me, five years later, you’ll be wishing you had a spare five grand lying around.

This is a point worth making, which shouldn’t have to be said (but it does). First, as we’ve discussed, the two-month salary guideline was pretty awful, and led to more backlash than increasing sales.  Thankfully, it’s not used too much anymore.

Secondly, yes, people should think carefully before they splurge for an engagement ring, as well as for their wedding ceremony and honeymoon—and, for that matter, before they get married.

But nowhere does this piece address the main selling point of diamonds: They are pretty. Often beautiful. Just as a painting is beautiful. Or a nice piece of furniture. Or any other piece of jewelry or clothing. And if people find beauty in (and can afford) them, and their diamonds mean something to them, then they have gotten their money’s worth. 

Thoughts?

JCK News Director