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  Why we're not James Bond, or Murphy's law of gems

by Menahem Sevdrmish, FGA D.Litt
May 8, 2012


We all know that if something can go wrong, then it almost certainly shall. In fact our working assumption is that if things are going just right for no apparent reason, then something surely must be wrong. You may, without thinking flip your hat across the room, and like James Bond hook it neatly on the coat stand. But try do it again; you'll never make it. That's just the way it is.

Call it Murphy's Law; call it whatever you want. It definitely applies to the diamond and jewelry trade, just as it does to every business or life activity. Pessimism is a sound management approach. Allow me to elaborate.

When you lose in the gem and diamond world, you're really making money
Gem and diamond dealers are like babies, the more they cry about their misfortune the more they grow - business-wise that is. As I asked one of my friends: "How, in the name of all gems, if you lose and lose, did you become so big and rich?" To which he replied that he lost a great deal. "But how can you lose a lot and still look very good?" His simple answer was: "I sold to other dealers who lost even more". And how are they doing now, I asked with astonishment. "Oh, they are fine, even richer than me," my friend replied.

You will never have enough of the size that your customer asks for
No matter how big your production is, and how precisely you aim to fill your customers' needs, you'll never have enough of the "right stuff." In my early days as a gem cutter, when I used to cut parcels worth maybe $10,000 in total, when I displayed the cut goods to my customers they never found enough of the sizes they were looking for. IN those days I dreamed of a time when I would produce enough so that customer would find all that they wanted among my production.

And then I grew and started producing batches with $50,000 at a time, cutting large numbers of beautiful stones. But still the customers could not find all that they needed, and they invariably asked for goods I did not have.

And then with God's help and with some luck I reached the stage at which I am today, where I am producing really large parcels, with practically all sizes and shapes which my customers need. But of course, of course, they never find enough of what they are looking for.

The further you are from the source the bigger the discount you get and the longer the terms of payment
At the mines, literally meters away from where the rough gemstones see the light of day for the first time, you always have to pay cash and rarely get discounts of more than a few percent. In the cutting centers, such as in Bangkok and Jaipur, you may ask for 30 days terms but still get only a real 10-20 percent discount. In the consuming countries your business customers will demand 90-120 days terms and a 30 percent discount. And in the jewelry store a 50-80 percent discount is common as well as very long term credit terms. They even throw in air mileage points.

I am still trying to figure out this phenomenon, because using my poor judgment, one is better buying gems as a private customer, and sell it to the mines. He or she will get a way more attractive price, and have the money way before payment is due. And then I remembered Einstein and his theory of relativity...

That's just the way things are. Murphy, they say, was an incorrigible optimist.

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