Planet Money buys a mystery diamond

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0:27A little while back, I bought something online that, frankly, seemed too good to be true. And after seeing this thing with my own eyes, I knew I had to share it with somebody. My Planet Money colleague, Sarah Gonzalez. It's like a white envelope. Mm-hmm, mm-hmm. I had mailed this thing to her as a kind of proposal to, you know, co-host this episode about this very strange economic mystery. And then more bubble wrap. This package had come from the Chinese e-commerce website Alibaba. Alibaba is the kind of place where you can buy, like, two dozen lawnmowers straight from the factory. You gotta pop the bubbles.

1:15But what I had bought was a lot smaller. Oh, so satisfying! And a lot shinier. Jeff, what is this? Is it a fake diamond or a real diamond? Sarah. This is not a real diamond. According to the website that I bought it off of, that is a real diamond. What? It is a one carat colorless ideal cut diamond. It's basically an engagement ring quality diamond. That's what they told me. Wait, this is like creme de la creme, top of the top, like perfect cut, perfect clarity. Dude, it's sparkly. Now, the retail price for a diamond like this, it depends. If it's a natural diamond, we're talking$5 ,000. If it's a lab-grown diamond, we're still talking around$1 ,000.

2:13But that was not what Alibaba was charging. So how much did you pay? Um, I paid$137. What? I mean, it's not a real diamond, right? There's no way. Or is there a way? Hello and welcome to the Planet Money Diamond. I'm Jeff Guo. I'm Sarah Gonzalez. And Jeff, this is the start of a real mystery here. Or a scam. Is it a diamond? Is it real? How is it$137? Well, today on the show, we're going to answer all of those questions and dive into the economics of sparkly, sparkly things. My favorite things. Because the market for diamonds, let me tell you, it started to get very, very weird.

3:04Yeah. No, I think it's just going to be a fake diamond. Support comes from our 2025 lead sponsor of Planet Money, Amazon Business. Every business starts with an idea. How can you go from daydreamer to industry leader? Amazon Business accelerates your journey. With smart business buying, get everything you need to grow in one familiar place. From office supplies to IT essentials and maintenance tools, Amazon Business takes the familiar Amazon buying experience and adds tools that help you save costs and make inside space decisions. Ready to bring your visions to life? Learn how at AmazonBusiness.com.

3:42This message comes from Insperity. Excellence takes drive. Work. Perseverance. Tiger Woods brings it to the course. Insperity brings it to your business. Want to be the best? Work with the best. Insperity. How you HR matters. Learn more at insperity.com slash tiger. So, Jeff, when you sent me this diamond that you apparently bought, sight unseen, off of this website in China for$137, My first thought was, obviously, it's not real, right? Which is why we tried some experiments. So there are, like, tests you can do at home to see if something's a diamond or not. Do you want to try those? Oh, yes.

4:28They're not, like, definitive or anything. You can, like, get clues. No, not bite it. Don't bite the diamond. Like, smash it. The first actual test that you had me try was to try to scratch something really hard with this diamond of ours. Right. Because diamonds, which are made of carbon, they are the hardest naturally occurring substance on Earth. Jeff. What? It literally created like a gash in my glass kombucha jar. Oh, my God. Test number one, kind of promising. It's feeling real. Test number two, put a diamond in a glass of water. Diamonds are super dense, so they sink. But fake stones, a lot of them will float.

5:12All right, I'm dropping in the diamond. Let's see if it makes it clink. Okay. It sank straight down to the bottom. All the way to the bottom. Wow, it looks even sparklier in water. Test number three, you had me hold the diamond up against my cheek. Right, so diamonds are incredible conductors of heat. So they're supposed to feel weirdly cool against your skin. Does it feel hot or cold? No. You feel nothing? It doesn't feel hot. Maybe warm. Okay, so the last test, I'm going to say not looking good for you, Jeff. But yes, the other two experiments were leaning diamond. Obviously, these tests are not like super scientific.

5:57No, no, no, no. So do you want to know the real answer, Sarah? Oh, already? So soon? Well, no, no, no. First, I got to tell you a story about how I figured it out. Of course. All right. Let me get settled in here. Okay. So before I ever mailed you the Planet Money Mystery Diamond, I actually took it on a couple adventures. We started out at the GIA, the Gemological Institute of America. They're like the diamond experts. So a couple weeks ago, Okay, we're walking into the GIA. I went to one of their labs in Midtown Manhattan. Wow, this lobby is really pretty. For the diamond industry, the GIA is like the temple of truth.

6:39It's where people take their diamonds to get poked and prodded and given a grade by expert gemologists. I met their executive vice president, Tom Moses. Hi. Hi, Tom Moses. Hi. who was going to take me behind the scenes, which they don't usually do because the GIA inspects millions and millions of diamonds a year. So let's just say we were in the presence of a lot of dollar signs. And I've noticed we have a security guard following us. Yes, we do. Is that just for me? Yeah, just for you. No, no, I'm kidding. I'm kidding. Tom kind of was not kidding. The whole time I was there, I had to have a security escort.

7:21Anyway, Tom introduced me to the scientist who is going to be taking a look at the Planet Money Mystery Diamond. Ulrika Danens Johansson, Senior Manager of Diamond Research here. Dr. Ulrika Danens Johansson has a PhD in physics, specifically in diamonds and how to identify them. So, if anybody in the world could tell us what we had, whether it was a real diamond or a cubic zirconia or some newfangled futuristic kind of fake diamond, it was going to be Dr. Ulrica. Should we talk about this mystery diamond that I bought? Yeah, please, let's. All right.

8:02I've been showing it off, so it might be a little smudged. That's okay. On the table in front of us was a large microscope hooked up to a television. So now taking your mystery diamond and looking at it under the microscope. I'm sorry, I think that's some cat hair. Yeah, there's a little bit of cat hair there. A little bit of fluff, but that's not a problem. It wouldn't be a Jeff Guo story if some cat hair wasn't involved. My life is covered in cat hair. So after getting the cat hair off and the fingerprints of basically all my friends and family, Ulrika got her first good look at the Planet Money mystery diamond.

8:42What I'm seeing here, at least, is that it's very high clarity. Oh, that's good, right? That's good. Ulrika said, yeah, if this is a diamond, it is a very nice diamond. And to figure out if it is a diamond, she was going to pull out all the stops for us, run all of these fancy scientific tests. So she takes me to where the GIA keeps all of its most advanced equipment. It kind of looks like a room where NASA might assemble satellites. Like the walls are white, the ceilings are white. There's this HVAC system that's filtering out every stray pinpoint of dust. And in one corner, there's this big beige cabinet.

9:20It was called a spectrophotometer. This machine was going to tell us what kinds of atoms the Planet Money mystery diamond was made of. A real diamond, of course, is made of pure carbon. Now, to get our diamond ready for the big test, apparently we had to make it really, really cold. We need to give it a little bath. It's going to go in liquid nitrogen. So liquid nitrogen... I'm sorry, what? No one told me about this. Your diamond is going to take a bath now. Ulrika has this bubbling thermos of liquid nitrogen. She pours it over our mystery diamond, which is sitting in a little dish, and she loads it into the machine.

9:57Inside, a bunch of lasers turn on, and they're just, like, blasting our sample. Like, pew, pew, pew, pew, pew. Meanwhile, Ulrika is watching a monitor nearby. Thinking about it, and then the squiggles come up. So the screen was showing this squiggly graph. It looked like a bunch of mountain peaks. And somewhere in those peaks was the answer. Ulrika points to one of them. This one here? She says that specific peak in that specific place, it tells us we have carbon atoms. Carbon atoms arranged in a very special way. It tells us this is diamond. 100%. This is a diamond. So we're not looking at a stimulant.

10:40Okay. Confirmed. We have a diamond. We have a diamond here. No. Yes. This is a real diamond? Yes. Sarah, it is official. The Planet Money diamond is a real diamond. This is a twist. I wasn't expecting this. But hold on. There are diamonds, right? And then there are diamonds, you know? There's natural diamonds and then there's like the lab-grown diamonds. So is this where we're headed? Okay, okay. So it is true that for the last 10, 15 years, People have been growing these beautiful diamonds in the lab. But I just want to be clear. Natural diamonds and lab-grown diamonds, they are both real diamonds.

11:29They are chemically the exact same thing. I mean, tell that to the real diamond crowd. But okay, I will say the big difference between natural and lab-grown is still price. Right. So a natural diamond like this could sell for maybe$5 ,000. But if it's lab-grown, the price is more like$1 ,000. And Olwerka's machines, they could actually tell us exactly what we had. Because every diamond, it turns out, is unique. It doesn't matter if they look flawless to the naked eye. Olwerka says they all have these little defects, these little impurities, little imperfections. It's that imprint of how it grew, how it survived in the earth, or how it was produced in a laboratory.

12:16Like a fingerprint or like freckles. Yes, exactly. The placement of freckles on anyone who has freckles is slightly different. So these imperfections can tell you how a diamond came to be. And when Ulrika examined our diamond, she saw three really telling imperfections. Number one, she saw when she looked at it under the microscope. They're teeny tiny little black specks. Oh, I see them. Oh, but they're so small. So these specks, most diamonds have them, are bits of stuff from the environment that get trapped inside the diamond when it's born, whether that's deep underground or in a lab. Now, the second imperfection she saw was when our diamond was in that fancy liquid nitrogen laser machine.

12:59Because no diamond is like 100 % carbon. Most natural diamonds, they have a little bit of nitrogen in them. But our diamond? It had something else. It had tiny traces of silicon in it. You can see it on the chart. That feature creates this spectral signature. And both of these clues, they were pointing in the same direction. It's lab-grown, not natural. That's right. So the Planet Money diamond is a real diamond just grown in a lab, and Ulrika is like 100 % sure about this. She is 100, 1 ,000 % sure. She said the shape of those little black specks and the fact that there was silicon, those are really only things you see in lab-grown diamonds.

13:44Okay, but now here is the coolest part. There is one more imperfection that Ulrika noticed. And the moment she saw it, she was like, oh, not only can I tell you this is a lab-grown diamond, I can tell you exactly how they grew it. How do you even grow a diamond? Isn't it amazing? There are actually two different ways that people create large diamonds in the lab. So one, you try to mimic how a diamond is made in nature. So you get this giant press. Some of them are 20 feet tall. And you just like squish some carbon at really high temperatures. But there's also a newer method that's becoming really popular.

14:25It involves growing diamonds layer by layer. And what Ulrica says is basically a fancy microwave oven. So when Ulrika put our diamond under this special blacklight and zoomed way in, she could actually see traces of that process. One of the things that you'll notice is that there's a line going through it, a layer. Under the blacklight, you could see a very faint line going through the middle of our diamond. So as they were growing, probably they were struggling a little bit with their conditions. They weren't able to maintain it. They had to stop. They take it out, get a little clean, polish it up.

15:02And then they grew a second layer. So you're telling me that the top half and the bottom half of the diamond grew at different stages. Yes, different stages. We have a Kit Kat diamond. It's got, like, layers to it. Yes. Yes. So it's not the perfect, perfectly imperfect lab-grown diamond. I just want to be clear. I just want to be clear here, okay, that layers are invisible. You cannot see it with the naked eye. This is a high-quality diamond that happens to be lab-grown. Okay, but here's the thing that still doesn't make sense. If you were to walk into a diamond store today and try to buy a lab-grown diamond like this one, like our Planet Money lab-grown diamond, that would cost you like a thousand whole dollars.

15:51And yet you bought this lab-grown diamond for$137. dollars. Yeah. So that, that is the final mystery we're going to try to figure out. After the break, we're talking about the bizarre economics of the diamond market.

16:15This message comes from NPR sponsor, Charles Schwab. When is the right time to sell a stock? How do you protect against inflation? Financial decisions can be tricky, and often your own cognitive and emotional biases can lead you astray. Financial Decoder, an original podcast from Charles Schwab, can help. Join host Mark Rebe as he offers practical solutions to help overcome the cognitive and emotional biases that may affect your investing decisions. Download the latest episode and subscribe at schwab.com slash financial decoder. This message comes from NPR sponsor U.S. Bank. With U.S. Bank Business Essentials, you get more than just a bank.

16:57You get a dedicated partner that provides you a powerful combo of checking and card payment processing with quick access to the money you've earned, proving that there is nothing as powerful as the power of us. Visit usbank.com today to learn more. Member FDIC. Copyright 2025 U.S. Bank. So before we talk about how we were able to get a diamond for$137, let's just take a step back to talk about where diamond prices in general even come from. Like why why do we even pay whatever amount of money for a rock? Yeah, exactly. Like the diamond industry is built around this kind of circular idea that people want diamonds because they're valuable, which makes diamonds valuable because people want them because they're valuable.

17:50And the deeper you get into the economics of diamonds, the weirder it gets. So to understand how our planet money diamond fits into all of this, we should start with natural diamonds. Like, why are natural diamonds so expensive? The modern version of that story begins with De Beers. De Beers, the diamond company, they got us all to think diamonds are special. Yeah. So for many, many decades, the De Beers company, they controlled almost all the world's diamond mines. So they were able to keep the supply of diamonds really low. But more importantly, like you said, in the 1930s and 40s, De Beers launched maybe the most genius marketing campaign in history.

18:32They convinced all of us that if you love someone, you get them a diamond. You better have that diamond ring if you want to get engaged. The diamond is forever. That's them. It's forever. Yeah. So that marketing campaign really, really juiced diamond demand. Yeah. And of course, when you have high demand and you have a company that's like keeping the supply of diamonds low, that is obviously going to make the price of diamonds go up. Exactly. But now the story gets weirder because by the 1990s, De Beers had started to lose its diamond monopoly. A bunch of competing diamond mines had opened up.

19:10De Beers later had to settle an antitrust lawsuit. So they didn't control the supply of diamonds anymore. But diamond prices still stayed high for decades. Yeah. Why is that? I'm so glad you asked because I called up the expert. Can you just say your name for us and what you do? Yeah, so my name's Paul Zimniski, and I'm an independent diamond industry analyst. Paul Zimniski is like the diamond markets guy. He travels the world visiting mines and factories, collecting data on supply and demand. Paul says right around the time that Tabirs was losing control over the supply of diamonds, they found a big new way to juice demand.

19:49They took the same classic playbook, you know, a diamond is something you give to someone because you love them, all that stuff. And they deployed that playbook in a huge, untapped market, a country with more consumers than anywhere else in the world. China. China. You know, culturally, Chinese consumers really didn't buy diamonds prior to, say, the 2000s. So they were kind of marketing that as a new area to drive diamond demand. And, you know, it started to really catch on. So in large part thanks to these new Chinese customers buying into the story of diamonds and also buying a lot of diamonds, Paul says diamond prices actually hit a new peak in the 2010s.

20:31OK, so now lab-grown diamonds, though, they enter the mix. Yeah. Does that not bring the price of natural diamonds down? Yes. But here's where the diamond story gets even, even weirder. So these high-quality lab-grown diamonds, they started hitting the market in a big way about a decade ago. And people did worry at the time, are these going to crash the price of diamonds? But because scientists like Ulrica can actually tell a lab-grown diamond from a natural diamond, instead what happened is the diamond market split into two different markets. So if you look at the market for natural diamonds over the past 10 years, the price has come down maybe 20%.

21:16Because people who would have bought natural diamonds started buying the lab-grown ones. Yeah, that is a big part of it. But then you look at the market for lab-grown diamonds, and that has been just on a wild ride. So at first, lab-grown diamonds were pretty expensive. Paul says if you went to the jewelry store, the lab-growns, they were only 10 % cheaper than natural diamonds. Essentially, they were selling, you know, a lab diamond, having the same maybe meaning. if you will, of a natural diamond. So they were piggybacking off the sort of a diamond is forever and super expensive marketing stuff from De Beers.

21:54Absolutely. That's the way I see it. They're essentially riding on their coattails. Like you remember the marketing for the Sarah, right? It was like, be ethical. Yeah, this is not a blood diamond. This came from a lab. Yeah. But the more and more people that started to buy lab grown diamonds, the more companies invested in perfecting the technology to make them. to grow them bigger and cheaper. A lot of those breakthroughs were happening in China, since China was already the world leader in making diamonds for industrial purposes. So, Sarah, let me show you something that blew my mind. Remember Alibaba, the Chinese website where I bought the Planet Money diamond?

22:34Well, they don't just sell diamonds there. Take a look at this page. Okay, I see a machine. I see like a big machine with like knobs all over it. It kind of looks like a big, giant, like, ice machine. Oh, it's a different kind of ice, Sarah. This is a chemical vapor deposition machine. This is basically one of those fancy microwaves Ulrich was talking about. Oh, so you can buy the thing to make your own diamond. For just$158 ,000. Yeah, yeah. Steel. Do you want to buy one? No, I'd rather just buy$158 ,000 worth of diamonds. I mean, a lot of people did think this was a steal. Paul says over the past couple years, companies in India and China have been buying tons of these kinds of machines, building big new factories.

23:22Paul's actually visited some of them. There's really not anybody there. It's basically machines that are growing diamonds. They'll just be, you know, rows and rows of them. All these automated factories with their rows and rows of diamond-making machines led to a huge upswing in the supply of lab-grown diamonds. I would describe it as like a bubble in production, a bubble in new supply that really became clear in I would say 2022 and 2023. Since then, the wholesale price for lab-grown diamonds has absolutely crashed. In just three years, it's fallen like 90%. It's been this cataclysm for the diamond industry.

24:00Paul says some lab-grown companies are going bankrupt. Also, you know how diamonds are also used a lot for industrial purposes. some companies are actually pivoting back to that, just making diamonds for like saw blades and drill bits. Diamonds are a construction worker's best friend, you know? They are. Okay, so this is how you got our diamond for so cheap. You got it wholesale direct from the supplier. Yeah, exactly. And the normal wholesale price for a diamond is something like$137, I guess. Well, you know, I did ask Paul about that. So how much do you think I paid for it? I would say the wholesale on that diamond is under$100.

24:45$100? Oh, gosh. He said under$100. What? Yeah, apparently this is like... So you overpaid for extra sparkly lab-grown badly made in a microwave diamond. I know. Apparently this is like an open secret in the industry. Literally, nobody that I talked to was surprised at all that I'd somehow managed to buy this diamond for$137. Apparently, it was not even that good of a deal. Okay, but there is this, like, disconnect for me. Because Paul is saying that the wholesale price for a lab-grown diamond like this one is$100-ish. dollars. But if you walk into like any diamond store right now, this exact kind of diamond is not going to cost you$100.

25:31At a store, it'll cost you like$1 ,000. Yeah, exactly. That is the biggest mystery in the diamond market right now. The markup. Yes. I think we should buy one of these diamond making machines. Yeah, I know. That's what I'm saying. So this is the big puzzle right now. Because for natural diamonds, the typical markup, like in a retail shop, it's maybe 30%. But for lab-grown diamonds, the markup right now is like 600%. Okay, logically, this should not happen, right? Someone else should just open a store next door, sell the lab-grown diamond for a lot less than$1 ,000, like$500,$300, they would still make a huge profit, and then everyone else would cut their prices and all the prices would go down.

26:20Right. But that isn't happening. And there are a couple of theories why. So theory number one is maybe there's collusion, right? Maybe there's some conspiracy among diamond stores to not lower their prices. But there are so many diamond stores, you know, in person, you can also buy them online. So it's kind of hard to imagine that they would all agree to this. Yeah, it doesn't seem like the likely scenario here. Yeah, yeah. So theory number two, this is about something maybe going on with customers. Think about when you buy a diamond, right? For most people, it's maybe once or twice in your life.

27:01So the price of diamonds is not like the price of gas. You're not paying attention to it all the time. Right. People don't really know what the price of diamonds are until they're at the store buying it. And when you see, oh, this one is$3 ,000 less than a natural diamond, you think like, wow, what a steal. You don't know that it should actually be even cheaper than that. You don't know that it's actually$100. Yeah. So part of this is that the price of these lab-grown diamonds has been changing so quickly, the wholesale price. But eventually you would expect consumers to catch on and for the prices to come down.

27:37PSA. News you can use. You're paying too much for your lab-grown diamonds. Well, unless you believe in the final theory, theory number three. And this goes back to why diamonds are so expensive in the first place. You know, the whole story that De Beers sold us decades ago, how diamonds are supposed to be this expensive symbol of love and affection. So there's a big difference between buying someone an engagement ring that costs$5 ,000 versus$99. Yeah, you don't want to seem cheap. Yeah, you know, I think it's just psychologically hard to let go of the idea that a diamond should be expensive. Like, on some level, it just doesn't seem right that you can just order a diamond like this for$137.