Tom Chatham's Key Points • The rise and fall of the natural ice trade shares many common themes with the evolution of the diamond industry. • Social attitudes, economic implications and effectiveness of communication about benefits and risks shape market acceptance. • People naturally tend to resist changes; however, efficient and cost-effective products tend to win out. |
Travel back in time to the mid-1800s, where two people have begun a voyage of immense implications. One of them is Cecil Rhodes, who was starting his diamond company by taking over an out-of-control mine in Africa.
The first mine was located on a farm owned by two Dutch settler brothers, Diederik Arnoldus de Beer and Johannes Nicolaas de Beer.
Prices were all over the board, and control was impossible. Rhodes came in and bought out, shut out, or murdered fellow miners so he could control the flow of diamond rough and stabilise the market.
His moves were both masterful and diabolical; however, without it, where would the diamond industry be today? Or perhaps I should say, where would the diamond industry have been, up until the year 2000?
As this unfolded, another mission was taking place at the same time, led by a man named Frederic Tudor. He had the wild idea of farming natural ice and selling it worldwide.
Mechanical refrigeration was still about 100 years away, so this idea had real merit.
Many places on Earth do not experience freezing temperatures in winter. The use of ice was a very novel idea and became a billion-dollar industry operating from the East Coast of the US.
As with the diamonds Cecil Rhodes wanted to control, natural ice was free for the taking from any body of water in cold winter zones.
Diamonds and ice may be readily available; however, marketing and distribution were at the core of the success of Rhodes and Tudor.
From the early 1800s to the 1860s, the natural ice business became the largest farmed crop, second only to cotton.
Thousands of tons of natural ice were delivered all over the world in ships and by train, and Frederic Tudor became a very wealthy individual.
Diamonds in the early 1800s may have been free from the ground; however, without the art of faceting developed in other countries, there was little use for rough diamonds in Africa, so Rhodes was able to control production easily.
Natural ice was also free; however, if it did not occur naturally in the winter where you lived, it was an unknown product, only used occasionally by those who lived in the appropriate climate.
And even then, it was a case of chipping some ice off a pond or lake and using it immediately, because there was no way to preserve it yet. When taken inside, it melted.
The advent of commercial ice gave rise to many claims, some of which we still hear today when discussing diamonds.
From the Natural Ice Association of America, consumers were told that ‘natural’ ice is better for you than any form of ‘artificial’ ice that is created by a machine.
It was even said that natural ice is far superior at killing bacteria in the water, unlike the germs in artificial ice.
The Natural Ice Association wanted every dealer to be proud of the word ‘natural’, which can only be produced by Mother Nature. Does this approach to marketing sound familiar to you?
That all-important qualifier, ‘natural’, was only to be used to create demand for the superior natural ice product.
The Association went on to boldly state that, “man can imitate Nature and make artificial ice, but he cannot improve upon the works of Nature.”
Ice, like diamonds, would become a worldwide product enjoyed by consumers who had never seen either ice or diamonds before, thanks to the influence and control Tudor and Rhodes brought to the table.
Ice was harvested in the winter and stored in special houses that delayed melting. However, in the effort to sell ice in many remote hot areas of the world, losses from melting could reach 90 per cent of the original volume. With that said, in many places, including Indian, Europe, and the Caribbean, it was a godsend!
Drinking a cold brew was especially enjoyed in the US during the yearly hot spells that no one could escape. The harvesting and storage of ‘natural ice’ also brought about the preservation of fruits and vegetables, allowing merchants to sell to consumers far more distant than anyone had before.
The same held for preserving meat - butchered in Chicago and shipped by railcar to the West Coast, with the help of stored natural ice.
The invention of mechanical ice was a thorn in the side of natural ice producers, just as the advent of lab-created diamond production has been for mined diamond companies.
Every marketing tool was used to upend the emergence of artificial ice. This battle began in earnest around 1900, when newspapers and magazines were used to attack the new upstart.
Most of the arguments were based on the assumed superiority of ‘natural’, as anything made by Mother Nature must automatically be considered to be better.
Consumers were told that machine ice was made from exhaust steam, which was blended with grease as it passed through the engines’ chests.
That grease was usually a paraffin-based product and indigestible. On the other hand, natural
ice was much purer because of the natural freezing process. Through careful manipulation, chemist reports were made public that suggested that the purity of natural ice was higher than that of any ice made in a machine.
Advances in biochemistry later proved these claims to be entirely wrong, showing that freezing water did not kill all harmful bacteria in pond water, no matter how long the ice was stored.
The success and control of the natural ice business were achieved by inventing and building numerous ice houses, designed and owned by Tudor worldwide.
Even if a market had access to natural ice, as was the case in Norway, the ice houses were not easy to duplicate. This meant that, one way or the other, Tudor was always one step ahead of the competition.
Rhodes didn’t invent a better mining method; however, he did create a better method of grading and distribution. Today, that creation is so complicated that nobody can duplicate it.
The De Beers sorting system of classifying rough has 17,000 different grades of rough. And with the well-worn truism that nobody knew diamonds better than De Beers, very few have successfully operated without the company’s ‘guidance’.
To say De Beers set the pricing system up is an understatement. All major producers follow the lead of De Beers, even if they don’t do business together. That was the case until the successful launch of lab-created diamonds.
House of cards
The natural ice business, once a thriving industry in the 19th and early 20th century, faced a rapid decline due to a combination of factors.
The development of mechanical refrigeration and the ability to produce artificial ice were the primary drivers behind the demise of the natural ice business.
The reliability of natural ice was dependent on weather patterns and environmental conditions, leading to fluctuations in supply and price.
Natural ice was often sourced from lakes and rivers, raising concerns about potential contamination and impacting its perceived quality. Modern medicine was in its infancy.
As artificial ice became more readily available and affordable, consumers began to prioritise convenience and reliability over the traditional methods of ice sourcing.
In essence, the rise of artificial ice production and the advancements in mechanical refrigeration technology ultimately led to the replacement of natural ice with more reliable, affordable, and readily available alternatives.
So, with all that said, where do we stand today in the diamond industry? Because of the tremendous acceptance of lab-created diamonds, the industry is in a period of spiralling price reductions, aided indirectly by consumer rejection due to natural diamond prices.
Additionally, there’s a fundamental truth to be considered: All diamonds are created equal, regardless of source. Lab-created diamonds are fundamentally identical to natural diamonds in every measurable way.
Ironically, all diamonds fall into four major sub-categories: 1A, 2A, 1B and 2B. This is based on trace impurities of nitrogen and boron. Almost all natural diamonds fall into the 1A group, while most lab-created diamonds fall into the 2A group.
This distinction is a measurement of nitrogen atoms floating around the lattice structure of all diamonds. Many diamond experts like to use this as an example of their differences.
Indeed, many machines have been invented to separate diamonds based on this distinction,
so it can be said that “see, diamonds can be separated in a matter of seconds.”
With that said, they are not really separating the diamonds based on physical properties. They are being separated based on their classification, and to make matters even more confusing, the very best and biggest natural diamonds are all type 2A.
And as was the case with the natural ice trade, sellers of natural diamonds were quick to defame and ridicule the sellers of lab-created diamonds.
Words such as ‘synthetic’ were introduced, with some even respelling the word to ‘sinthetics’ whenever discussing this new threat to natural diamonds.
This occurred even though it had previously been established that the word ‘synthetic’ was problematic following a Federal Trade Commission (FTC) court decision in 1962.
It was a case involving my father, Carroll Chatham.
At the time, the use of the word ‘synthetic’ was demanded by the natural gemstone trade, while Chatham felt it was demeaning and equal to ‘fake’. After a three-year court battle, Chatham prevailed, and while ‘synthetic’ was not banned, ‘created’ could be used in its place.
Additionally, industry pundits coined a few new terms, such as calling lab-created diamond producers ‘parasites’, suggesting they were responsible for introducing worthless imitations to the market, such as cubic zirconia.
These growers were even demonised for supposedly taking the bread from the mouths of hungry Africans.
Negative propaganda soon emerged from the lab-created diamond industry as well: Blood diamonds, slave traders, and allegations of ‘market manipulation and phony shortages’ are all thrown around to offset this negative press.
What did we learn?
These examples demonstrate that the path of innovation is rarely smooth. New ideas and products often face resistance from various sources, and their acceptance or rejection is shaped by a complex interplay of factors, including social attitudes, economic implications and effectiveness of communication and education about their benefits and risks.
There are many other examples of revolutionary products that did not start out well. Bicycles, automobiles, and aeroplanes were each dismissed as impractical or dangerous fads. Surely, nothing could improve on the horse!
The Horse Association of America actively campaigned against tractors, touting the virtues of horses as being more economically efficient. The advent of electricity sparked fears of death and injury by electrocution. The telephone was initially viewed as an expensive and unnecessary invention that could never possibly replace the telegraph.
Mechanised looms were attacked by textile workers who believed that they would lose their jobs to machinery. Finally, Mikimoto cultured pearls revolutionised the entire pearl industry.
There are always more changes on the horizon, for example, lab-created salmon and meat products. Will you eat it?
The lab-created diamond industry is about to revolutionise the diamond industry by replacing – yes, I mean replacing – the natural diamond, as the choice of consumers around the world.
THE GREAT DIAMOND DEBATE III
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