From Tulips to Diamonds: Why It’s Time to Rethink the Diamond Market

(ehudlaniado.com) - Have you ever heard of the Tulip Mania, the Dutch tulip bulb market bubble of 1630s? At the time, tulip bulbs became highly desirable to rich Dutch consumers, who viewed them as a status symbol. The resulting high demand for tulip bulbs drove up prices in a speculative wave of trading, until demand waned and prices crashed. Some consider this event a cautionary tale for investing in diamonds. I think, however, that there are some hidden lessons to the story, which we can apply to the diamond industry. The Tulip Mania did not develop within an organized framework. It was a wildly speculative market with few standards - not a well-developed exchange with strict standards for classification, and trade rules with long term and sustainable foundations. However, as long as Dutch consumers were interested in tulip bulbs, prices rose or remained stable. Once they lost interest, prices crashed just like any other asset on the exchange today. The lesson to learn from the tulip bulb bubble is that when there is a group of people that recognizes and shares the same idea, together they can create a market. This market will fluctuate as the group members’ beliefs, moods and expectations change. Just like gold, art, oil, and currency, the diamond can work as an asset that serves a group educated to accept and adopt it – as long as the process of education occurs in an organized and well-thought-out fashion.