#186: Is a Diamond Forever?
In our Strategy class (which is being taught by this dignified silver-haired professor with crisp shirts and precisely-pressed coats - sorry, I had to throw that detail in. He's attractive for a 60 year old man. And that's the beauty of being a professor. Your value increases as you grow older. Not like in the corporate world where respect declines as you grow older without the corresponding progress to the top position. But I digress.) our first case was the Argyle Diamonds case. Argyle is Australia's top diamond producer with cutting & polishing operations in Perth, investments in processing facilities in India, China and Thailand, and a trading center in Antwerp. The case was mostly about laying down the value chain and seeing where value is created. Is it in the mining? The cutting and polishing? The trading? Nope. It is in the value proposition of diamonds. Value is created in the minds of the consumers who, after DeBeers' 1939 campaign "A Diamond is Forever" promoting the diamond engagement ring as a must (primarily to soak up stockpiles of diamond surplus), started making diamonds "a must" in making their commitment official.
To illustrate, the professor asked married and engaged people in class to raise up their hands. He then proceeded to ask the guys the average amount they spent for their engagement rings. Without giving exact figures, someone blurted out, "a month's salary." The teaching assistant proceeded to write on the board the average monthly salary of an MBA graduate. Then this girl from the back of the room oozing with confidence and overflowing with perkiness defiantly said, "Not a month! At least three months' salary!" Which then triggered eyebrows to shoot up in disbelief. I think it was a defining moment for her in that the whole class started knowing her name. She was Lucy in the sky with diamonds. And all the guys started loathing her.
I remember this TV show I saw snippets of sometime back where the lead girl, who was previously sure about marrying this guy, started having doubts because of the cut of the diamond ring he gave when he proposed. She felt that the choice (round diamond in yellow gold setting) reflected his unfamiliarity with her tastes and with her as a whole. "He doesn't really know me. How could I marry someone who doesn't really know me?" Of course before the end of the episode, the guy - one way or another (got her friend to do the picking, I think), ended up re-proposing with the emerald cut one in platinum (or white gold) setting. Nice ring. Weird ending. How does that address her concerns about his unfamiliarity with her as a whole? Wasn't that just a display of his resourcefulness in accessing relevant information? The friend helped with the choice, good. But did she act in a counterproductive way by accelerating her move toward that direction without the resolution she needed for her issue?
I go back to my talk on value propositions. What is the value proposition of a diamond? It is in the attached meaning. For some, that is inextricably linked to the price. A one carat (200mg) diamond that is D-flawless cannot be differentiated by the naked eye from a half-carat SI (slightly imperfect) one. But the difference between USD40,000 and USD430 (wholesale prices in 1981) will definitely hurt the poor guy wanting to merely express his commitment and desire to be with his girl forever. I don't know about Lucy but she may be able to get a couple of tips from JLo's 5-carat engagement to Ben Affleck.
The professor told us about this dude who bought an extremely expensive engagement ring for his girl. They were at the beach and when the girl was about to swim with the ring, he freaked out and asked why the heck she planned to swim with such an expensive thing? She looked at him and said, "You want me to take it off? Here. It's off. So is the engagement." She threw the ring on the sand and stormed off. Ick.
For others, it's not in the price. It's in the story. You can break this down further by grouping stories of fabulous proposals (HongKong, Singapore...billboards, beachside with sandcastles and candles and floating flowers whatever) and those of just beautiful love stories building up to that point. The proposal might be glamorous and a well-oiled major production with fireworks and tap-dancing but if the path getting there is littered with bones of conflict and distrust, what can you look forward to after the stardust has settled?
When I went back to the Philippines, I was overwhelmed with flashing bling-blings and stories of engagement proposals. To be honest, I couldn't tell one ring from another. (Except I noticed that Rachel's was set in white gold). And if I compiled all the stories - all cool ones, I tell you, I know that before the next breath, someone, somewhere in some other part of the Philippines, some guy is topping those stories by walking on a tightrope, holding fireballs, eating broken glass and spitting out a diamond ring to propose to his woman. It's not THE story. It's how the story is YOUR shared story.
What's the bottomline? Outside of the industry that Argyle actually plays in, there is no way of accurately measuring the depth of the meaning of a diamond. It goes beyond carat, cut, clarity, color. It weaves experiences, emotions, and expectations for the future and such into it. DeBeers' campaign is no doubt brilliant but before we put a tag to the ring, we ought to ask: which should be forever anyway - the diamond or the commitment behind it?