Recently Martin Rappaport likened the diamond industry’s current trouble to flying a plane in freefall: a knee-jerk reaction to pull the nose up (fighting external forces) will inevitably fail, whereas pushing the nose down and eventually getting lift (going with the flow) will allow you to recover.

My problem with this analogy is that it’s already too late. What do you do when you are too close to the ground and there is no air left to lift you up? That is unfortunately the case with the diamond trade; there is no cash left and many companies are de-facto bankrupt.

Even for companies that can afford it, I don’t think slashing prices will help. It is a well known phenomenon in luxury that when prices go below a certain level, demand shrinks. Lower your prices and you will send away the few who are still willing to buy a diamond.

It seems that we are dealing with an autistic industry that is totally disconnected from the reality out there. The real market for diamonds, consumer and otherwise, is not running by the theories that many experts are putting out right now. If the industry really wants to start doing something that works, they’ll need to examine their consumer base and rethink their marketing.