My Work: Ehud Laniado
Interview: Haris Stavridis // Portrait: Courtesy of Ehud Laniado
You lived in Africa in your early 20s and then moved to Belgium. How did you start working with diamonds and what attracted you to them?
My career in diamonds began in the Central African Republic, where I was a buyer for an Israeli company. I bought rough diamonds from local miners who dug using an artisanal process. I lived with them in the heart of the jungle, and bought their daily yield. Mine deposits contain all types and sizes of diamonds – from the cheapest to the most expensive. Every day began with the same question: what will be presented to me today? Gradually, I developed the skills that enabled me to evaluate the entire contents of a mine deposit, which we call ‘run-of-mine’. This knowledge has remained with me since, and has become a great asset which has guided me through the course of my career. There is nothing quite like holding a rough diamond in your hand and knowing that it could become someone’s most precious possession, while having the ability to assess its value. In the 1980s I moved to Antwerp, where I discovered new opportunities within the industry spanning trade, manufacturing, valuing and polishing. I now have interests in all these areas with operating offices in most diamond centres. Today, Monte Carlo is my home. I have always loved being at the heart of a centuries-old industry that remains relevant to so many people today.
Could you please describe your current role at Mercury Diamond?
I am the principal of Mercury Diamond, a rough and polished diamond pricing consultancy, which embodies my personal passion and vision. The company grew out of the need for a standardised method for valuing diamonds as there have been big changes to our industry during the last decade. The internet has revolutionised the way people do business and consumers are now more educated than ever. Yet in our industry, there is insufficient readily available information on the value of diamonds to satisfy buyers, and certainly not enough to suffice for the new generation of buyers. Take an engagement ring as an example. Today, most diamond jewellery purchased at shops loses a significant proportion of its resale value the moment the customer types in the fourth digit of their pin number. However, when savvy customers have access to accurate pricing information, they will know where to buy and sell diamonds at fair market prices and they will be able to do as much research into a diamond as they can currently conduct into any other object they seek to buy.
Transparency in diamond pricing holds the potential to usher in a new era for the diamond industry — an era that could dramatically change the way diamonds are perceived. This is the rationale behind the Mercury Crystal Clear — an innovative system designed to value polished and rough diamonds. For over forty years, I meticulously documented and analysed my findings on the prices of rough and polished diamonds. The sophisticated data I developed led me to create two computerised proprietary diamond valuation systems — one for rough diamonds and one for polished diamonds. These have formed the basis of Mercury Diamond and today they are being used to price diamonds worth more than one billion dollars annually.
The various tools we offer at Mercury Diamond are designed to help buyers and sellers within the diamond industry when making economic decisions. For example, Mercury Crystal Clear helps manufacturers to decide whether to invest in a specific assortment of rough diamonds and at what recommended price. With regards to polished diamonds, I believe that if prices become more openly available and if re-selling a diamond would not involve incurring such high losses, diamonds would become an even more attractive type of asset class, and an increasingly important revenue stream for dealers and manufacturers as a result. In addition to helping buyers and sellers make more informed decisions, we are helping to transform the perception of a diamond as an expense into an item that carries a promising resale value that can be considered a long-term asset for wealth preservation, for example.
At the core of our pricing methods is an occupation with what we at Mercury call ‘irregularities.’ Most consumers know about the key characteristics of a polished diamond, known as the 4Cs — colour, clarity, cut and carat weight. But most do not know about irregularities, which are factors such as fluorescence, imperfection types and imperfection positions, as well as any other comment on the diamond certificate. Irregularities can cause diamonds that are graded identically according to the 4Cs, to be offered for sale at very different prices. Mercury Crystal Clear takes all factors affecting diamond prices into account in a systematic and data-driven way. It involves a series of sophisticated tools, which include a proprietary table with discounts and premiums for each diamond irregularity in order to give diamond consumers access to the most accurate prices available.
What is your typical day at the office like?
A typical day starts with a general review of the global markets and the diamond markets. I am in constant contact with the various offices and their staff, as decisions are examined on a daily basis in line with the global strategy. The sharp fluctuations in the global economy and diamond industry oblige us to look into any decision carefully in order to change strategy in a relatively short time to keep the business healthy with an adequate cash flow for the long term. The rapid changes in technology enable us today to “be at the office” any time and anywhere, and to be connected in real time. As a global businessman, I see the differences between the approach to diamonds and precious gems across different countries and cultures. For instance, in the US and China, great importance is given to the pricing of diamonds and diamond jewellery and they seek value for money, while in most European countries although price is also important, greater importance is given to finding stones of the greatest possible clarity, while in India they look for clean colour and large stones.
What are your three biggest headaches at work right now?
I am very concerned about the state of the diamond industry in recent years. Two issues especially concern me. The gradual decline in the global trade of polished diamonds, which I view as stemming from a lack of transparency. And the issue of unreported laboratory-grown diamonds and the resultant fear that they will enter the natural diamond supply chain and diminish the end consumer’s trust. This has the potential to harm the livelihood of millions of workers in Africa and developing regions, and in the Western World. Over my long career, I have seen many changes in the diamond industry and I am certain that this time too, the industry will adopt a new approach and overcome the tremendous challenges that it faces, but I am still concerned.
Could you tell us about the Blue Moon Diamond and the story behind its discovery?
The night the 12.03-carat Blue Moon was sold at Sotheby’s Geneva on 12 November 2015, it broke all known records, selling for $48.4 million. The Blue Moon, now renamed the Blue Moon of Josephine, was discovered in the Cullinan Mine in South Africa in January 2014. This mine has a history of yielding some of the most exceptional diamonds of all time, including the Cullinan I Diamond and Cullinan II, both of which are to be found in the Queen of England’s Crown Jewels. The Blue Moon’s beauty stems from its overwhelming intense ocean-blue colour, which strikes everyone who views the stone with their own eyes. New York-based Cora International, one of the companies I chair, participated in a competitive bid and acquired the 29.62-carat rough diamond for $25.5 million. Then came the hard work. We spent five months assessing the stone, and developed thirty models, cutting each one differently until the perfect result was achieved. It was a huge relief when we finished. Even among this extremely rare class of blue diamonds, to create a vivid blue, 12-carat, internally flawless diamond really is as rare as a blue moon. Suzette Gomes, Cora's CEO, accurately described the process as an “emotional rollercoaster” involving “four stress-filled months” of “sleepless nights and restless days and constant decisions to adapt to complications that were guided by the stone.” Following this, Cora gave researchers at the Smithsonian in Washington. the opportunity to study this rare stone, as they had a strong research interest in learning more about it. It then went on display at the Los Angeles County Museum of Natural History where thousands of people had the opportunity to see the diamond and be inspired by its beauty before we put it up for auction.
You seem to be pushing for a greater level of transparency when it comes to diamond pricing. Could you describe the current situation in regards to this and how you are working towards achieving that goal?
Today’s buyers are hungry for information, as the lack of transparency in the diamond market lessens the younger generation's appreciation for them. Even if today’s consumers inherit diamonds from their family, I believe they will treat them differently if they have an exact understanding of what is in their possession. Mercury Crystal Clear, gives buyers access to the most accurate and transparent prices available based on a diamond’s characteristics. The system employs a meticulous approach, encompassing more than 18,000 individual diamond price points, thus improving the ability of buyers and sellers to price diamonds without the need to see them in person. It also has the potential to be used to support new industry developments, such as diamond spot markets and the purchase of diamonds as a means for wealth preservation.
Our tools also include the Mercury Polished Price Calculator, which estimates current market prices of a polished diamond based on all its characteristics, going beyond the traditional 4Cs. It takes into account comments and other irregularities found on a diamond-grading certificate (which we call the 5th C), based on Mercury’s table of irregularities. This allows us to calculate discounts and premiums to a diamond’s value based on those irregularities and generate an accurate estimate and come up with a recommended price. The Mercury Polished Stone Finder for Defined Budget allows companies trading polished diamonds to investigate in real time a list of diamonds that can be purchased for a given budget. This tool enables companies to clearly understand all the trade-offs by comparing sizes, shapes, colours, qualities and all possible irregularities.
We have also developed the industry’s first price tracker to cover larger diamond sizes — the Mercury Diamond Global Price Tracker, which captures the past price behaviour and trends of diamonds from one to 30 carats, over many years. Our hope is to detect future behaviour when we are closer to a spot market for diamonds. The Mercury Rough Price Calculator provides a price estimate of a single rough stone or parcel of rough diamonds containing a part or full range of ‘run-of-mine’ depending on different yield scenarios, sizes, shapes, colours and clarities.
In one of your articles you said that small independent jewellers are slowly disappearing, replaced by much larger chain stores. Why is that and how is it affecting the industry overall?
The slow disappearance of small independent jewellers is a trend which has been at play for years, and there is no sign of it abating. De Beers believes that buyers’ rising expectations and the increased investment needed to support them may have led to this consolidation. It is also a trend that makes sense for retailers; larger groups have more influence and greater bargaining power, enabling them to increase their margins and serve the end user, the customer, in better ways. Tiffany & Co is a great example of this. It was one of the first diamond jewellery retailers to secure a reliable supply of high-quality rough diamonds in partnership with mining companies and the strategy has paid off. At one point Tiffany was able to develop an entire line of diamond jewellery based on canary yellow diamonds which it acquired as a result of its supply arrangement with Australian diamond mine Ellendale.
How is technology changing the rules for traditional jewellers? What kind of disruptions are you seeing and how do you feel about them?
Firstly, ever more sophisticated technology means it is increasingly difficult to distinguish between high quality laboratory-grown diamonds and the real thing. For younger, tech savvy jewellery lovers, laboratory-grown diamonds might be attractive, more affordable and eco-friendly alternatives to natural diamonds. However, I believe the growth of technologically advanced laboratory-grown diamonds could work in the natural diamond industry’s favour, because it will shine the light on the highest quality natural diamonds and their economy of rarity, value of exchange and potential for wealth preservation.
Technology is changing our industry in an immense way. Buyers are better informed than ever and internet jewellers have opened up a new world that allows buyers to educate themselves and to shop around while they cut costs and overheads. This is something that jewellers need to accept and adapt to. It’s why I have placed such an emphasis on transparency, and why I have spent years developing Mercury Crystal Clear. I am optimistic that the changes we are facing are a good thing for the industry and will open up diamonds as an asset class to people who may never have considered them in that light before.
You deal with a lot of people on a global level. What kind of personal skills does one need to have to be successful in a role like yours?
As in any industry, being able to build trust and long-term relationships with colleagues and clients is the most important quality a person can have. To create this level of trust means that one has to be able to buy and sell in a responsible manner backed by real value. Developing a reputation for expertise is just as important, as is trading with a win-win approach. Diamonds can be a tough industry for those not intimately involved, and even for those who are, education goes a long way.
What's on your daily reading list? Any great business books you'd like to recommend?
I try to read and follow everything that’s written about the diamond and jewellery industries: books, magazines, professional articles and so on. We live in a world that seems big, but in practice it is a tight-knit global village in which every event on one side of the globe directly impacts the rest. Therefore, I try to read as many books as I can about macroeconomics, geopolitics and any other field that is likely to influence developments in the world in general and the world of diamonds in particular. Furthermore, I make sure to stay abreast of innovations in the world of gadgets, social psychology and new trends. Today, an hour of dedicated reading on the Internet can enrich a person in almost any field they wish.
Could you tell us about the biggest setback you have faced in your career? How did you respond to it?
I think that currently the diamond industry is having to face up to a huge setback which has been years coming - the fact that consumers are buying less diamonds. I believe the cause is largely down to the lack of general advertising for polished diamonds, advertising that is irrespective of particular brands. I would like to see a new culture among a critical mass of people who understand that diamonds offer something beyond beauty. They offer an economy of rarity, an exchange value and a potential for long term capital appreciation.
What is the most solid, specific piece of advice you have for anyone wishing to work in the diamond business?
Knowledge is priceless. I would tell anyone wishing to work in diamonds to educate themselves. Find out all you can about diamonds, what makes them special, how you can assess the value of a rough diamond by calculating it back from the value of the yielded polished, master the value of the polished diamond while understanding what’s beyond the traditional 4Cs. Learn about the industry: What and who are the miners and what is their role? What value do manufacturers and retailers add to the product? What new technological developments are taking place across the entire diamond pipeline? I write about the key issues affecting the diamond industry in my regular market updates and I warmly encourage people wishing to break into the industry to become regular readers. The more you know and the more expertise you gain, the more valuable you will be to potential employers.
What kind of opportunities do you see for Mercury Diamond at the moment?
The main goal is to create and spread the new diamond culture of transparency based on methodology and the philosophy of Crystal Clear. The new culture that I want to spread among consumers, both those who have bought or inherited diamonds in the past and those who will buy them in the future, is based on the individual story of each diamond, on its financial value and how this values derive from its individual story based on the 4Cs, as well as its inclusions whose position and characteristics are part of its DNA, and all its other properties that constitute the unique personality of each diamond. This understanding is what will generate the connection between emotion and material – like in art, where diamonds are a kind of natural art. Therefore, I recommend to whoever possesses any kind of diamond to learn about the special properties of that diamond and to connect to its story. The same advice applies in even greater measure to future diamond buyers.
We also help clients manage risk and identify opportunities. We do this by streamlining the market data for prices of rough diamonds and their direct link to polished diamonds. We help, for now, a select group of clients to determine the fair value of polished and rough diamonds by equipping them with all the information they need to stay ahead of the game, whether that involves future rough or polished diamond purchasing decisions, managing rough inventory or accurate auditing. We enable manufacturers to keep rough diamond prices in touch with reality, by preventing the situation in which some midstream players are pushed to buy rough diamonds at prices that are not in line with their equivalent polished transaction prices.
More transparency on transaction prices will help to attribute profits more correctly, according to the value each player adds along the diamond value chain, whether it is polished diamond manufacturing, wholesale trading, jewellery design or retail activity. When implemented across the pipeline, this transparency can help companies to operate more sustainably and profitably by arming a new generation of consumers with a new culture: the Crystal Clear philosophy.
The views expressed here are solely those of the interviewee in his private capacity. No one should act upon any opinion or information found within this interview without consulting a professional qualified adviser.
