What's more precious than Diamonds?
Pandora will no longer mine diamonds. It is moving to something more precious. What, and why? Read on.
Pandora is the world’s biggest jeweller. Sorry, was. The big news is that it won’t mine diamonds anymore. It has also stopped using newly mined gold and silver for making jewellery since the past one year. Why?!
Because, “it’s the right thing to do”. The company is moving towards sustainability and plans to make its operations carbon neutral by 2025. But, how does the company plan to survive if it doesn’t use the very thing that makes jewellery so coveted for everyone?
By adopting lab-made diamonds that will be made using 100% renewable energy1. It also eliminates the risk of human-rights abuse that is linked with mined diamonds while reducing the cost by 77%. And, that’s not all. The cherry on the cake is that, to the naked eyes, mined and lab-made diamonds look just the same. The move is noble, cost effective and rationally thinking, it gives the same customer satisfaction.
But, it could still not change the diamond industry. Why? Because, the assumption of rationality does not work in the real world.
“Remarkable. Diamonds. Crystalized carbon. Every day, people go to the grocery store and come home with sacks full of carbon, in the form of charcoal briquettes, which they toss in their barbecues and set on fire. But just because you have some carbon with the atoms stacked neatly, you expect me to plunk down thousands of dollars”, said Sheldon, while purchasing a gift for his girlfriend, Amy.
He perfectly defines human irrationalities when it comes to diamonds. Anything that is rare and difficult to possess becomes special and captures our attention. And, that exactly is diamond’s USP.
Diamond jewelleries don't serve any purpose, other than boosting the ego of those who possess them. Higher the price, higher the ego booster, which flames the demand even further. Economists call this phenomenon a “snob appeal.” It is an exception to the law of demand, which says that demand of a commodity will go down as the price rises (like it logically should).
Now, let’s introduce lab-made diamonds to the party. It takes away the rarity and preciousness of diamonds. Sure it sparkles, but it won’t be rare anymore. And so, the value of the mighty diamond could fall. But, how is Pandora not seeing this? Even De Beers, the world’s biggest diamond company, that has since decades snubbed at using synthetic gems, has embraced them since 2018.
Well, for Pandora, diamonds don’t form a major chunk of their revenue. Out of 85 million pieces produced by the company last year, diamonds were used in only about 50,000 pieces. Pandora’s game plan is to make an everyday jewellery category using lab-made diamonds, since they are 10 times cheaper than mined-ones. The company has also picked up some interesting shifts in the customer sentiments, as more and more millennials are preferring sustainable options. So, it looks like a good move for the company from all aspects. Good press and increased revenue. Even its stock price went up by 7% after the announcement on 4th May 2021!
But, does it mean that if the world leader of jewellery is shunning mined diamonds, everyone else will follow suit and soon we won’t be mining diamonds anymore? That diamond will lose its rarity forever?
The answer lies in the gems of history. A gem that is 20 times more rare than diamond.
In the early 1900s, we discovered a lab based synthesis method for emeralds. They were more perfect and much less expensive than real emeralds.
Initially, people went gaga over it. The prices plunged and soon, emeralds were not rare anymore. And so, the excitement waned.
Two pieces of emeralds. Both look similar to naked eyes. But, one is considered more valuable because of the rarity of its origin and the other is considered close to worthless because of its abundance.
And, the human psyche suggests that we could do the same thing to diamonds too. The market for “mined” diamonds might still flourish because of its origin, while lab-made diamonds might come and go like a wave of fad.
It is us humans who assign values to things. Maybe it's time that we stop assigning values to hollow egos and start assigning more value to sustainability. It is upon us to decide what’s worthy of more value and what’s not.
What are your thoughts?
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Currently, the lab-made diamonds are grown with 50-60% renewable energy. Pandora aims to take this ratio to 100% next year.