Nov 13 2023

Artificial Diamond Boom

The history of aluminum, and what is now happening in the artificial diamond market, may tell us something about a post-scarcity world. Aluminum is the most abundant metal in the Earth’s crust. However, it like to form with other elements and therefore it was very difficulty to purify the metal. In the 1800s methods were discovered for purifying aluminum, but they were slow and expensive, and hence aluminum was scarce and expensive – $16 per pound ($419 in today’s dollars), more expensive than gold at the time. Famously, Napoleon set before his most prestigious guests aluminum cutlery, instead of the less exciting gold cutlery. But then, in 1887, two men (both in their 20s), American Charles Martin Hall and Frenchman Paul Héroult independently discovered the same method for purifying aluminum from ore (usually bauxite). Within two years aluminum fell to $2 per pound, then pennies per pound. Now we make cans and foil out of it.

Will a similar thing happen to the diamond market? Diamonds, despite common belief, are not made from coal. They are created deep underground, 177-241 km, where pressures and temperatures are high. They are brought to the surface through volcanic eruptions, embedded in a mineral known as kimberlite. While natural diamonds are highly valued for their beauty and strength, there is a lot of controversy surrounding the mining of diamonds. The mining process is disruptive to the environment, and tends to involve a great deal of conflict and exploitation.

Further, the pricing of diamonds has been a bit controversial. Natural diamonds are generally considered to be overpriced by marketing and market manipulation. They are marketed as rare and valuable gems, but in reality they are quite plentiful. Marketing of diamonds as a “girls best friend” and for engagement rings also fed this image. Like everything, prices are generally about supply and demand, but demand is kept high through marketing while supply is generally kept secret in order to keep the price elevated. Gem-quality diamonds are also a luxury item, so their value is inherently subjective.

The first artificial diamond was created in 1954, using a method that involves high pressure and temperature. There is now also a newer method called chemical vapor deposition (CVD), which is cheaper and becoming more popular. India in particular has a booming industry in synthetic diamonds, and first to decrease the need for import, but now increasingly for export. The CVD method uses a gas chamber containing carbon, and may also contain other elements that affect the color of the diamond. The temperature and pressure are manipulated to cause the carbon to precipitate out of the gas, forming onto a seed diamond which can grow to large size. Many diamonds can be made at the same time using this method, which takes 1-2 weeks. Periodically graphite needs to be cleaned from the growing diamond.

The resulting diamond is a diamond, chemically and in its structure and physical properties. Naked-eye examination cannot distinguish synthetic from naturally-occurring diamonds. Only advanced instruments and high magnification can tell the difference. They have a different strain pattern visible under 10x magnification. They have a different fluorescence pattern and synthetic diamonds lack the typical “Cape Line” at 415 nm on their absorption spectrum. But to the end user – there is no discernable difference. The features that typically determine a diamond’s value – cut, carat, color, and clarity – can all be the same. The cost of a synthetic diamond is in flux. Even just a few years ago they were 20-40% less expensive than a comparable natural diamond. Now they are in the 90% less expensive range – so for a $5,000 naturally occurring diamond, the synthetic equivalent would cost $500. This price is still coming down as production levels increase.

Right now we are in the psychological phase of this this transition. For the end user, there really is no rational reason to pay 10 times the price for the natural version of a synthetic diamond. There is no difference that can be discerned without special equipment, no difference to the alleged property that makes diamonds valuable – their beauty. There are some psychological and practical advantages, in fact. Synthetic diamonds are free of any conflict and the exploitation of mining diamonds (just the usual features of a capitalist system). They are more environmentally friendly, using much less water and having a lower carbon footprint.

The one thing that sellers of natural diamonds have to hang onto is that natural diamonds are more “valuable” and they retain their value more than synthetic diamonds. But most people do not buy diamonds for an investment. They buy them for the bling. This is also a somewhat circular argument – they are more valuable because they are more valuable. But – the value of natural diamonds are known to be artificially high. We have essentially been living in a diamond bubble for the last century. That bubble may pop, and then diamonds will be as good an investment as aluminum was in 1886.

Synthetic diamonds are becoming increasingly accepted. If history is any guide, there will be a tipping point, where buying a synthetic diamond engagement ring is considered perfectly acceptable, even responsible. Natural diamonds may go the way of real fur coats or ivory, once symbols of luxury, then symbols of waste, irresponsibility, exploitation, and narcissism.

The long term question is – are synthetic diamonds a herald of a post-scarcity world? Can we imagine a world with the following technologies – cheap, abundant, green energy (fusion, for example) powering digital on-demand manufacturing? What if some combination of 3-D printing and nanotechnology means that pretty much anything can be manufactured on the cheap? At some point will the cost of everything be negligible, essentially free? Will the economy just adapt? Will the system we have today, where people have jobs in order to make money to buy stuff, be essentially obsolete? If so, what will replace it? Will there be an endless line of artificial scarcity to prop up a failing system? Will we have an entirely service-based economy (at least until robots take over the entire service industry)? Will the only valuable service be intellectual, and will AI take that over? In short – what will have value in such a world?

These are some of the most difficult questions of futurism. No one really has any answers, just better and more interesting questions.

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