Diamond Wars: The Future of Lab Grown vs. Natural Diamonds

In 2018, the FTC said a lab-grown diamond is a real diamond. They're chemically, physically, optically identical. That's also the same year Lightbox started with De Beers. The idea for De Beers was to position Lightbox as a lower-end product fashion jewelry and Natural Diamonds as fine jewelry. That didn't end up panning out. So now lab-grown diamonds are 90% cheaper than the natural equivalent for something that's chemically, physically, optically identical. So lab has really taken off and really is replacing natural diamonds. And De Beers' primary business is natural diamonds. So they want to push much more on the natural diamond side and reduce their focus on the lab-grown side. Who are the biggest buyers of the lab-grown diamonds and why? So this year, 55% of engagement rings in the U.S. have lab-grown diamond centers. Just to back up, in 2018, that was 2%. So in 2018, I would say 95% of all engagement rings sold were natural diamonds. Now it's 40% in just a decade. So 15% of engagement rings sold now are colored gemstones, and 55% are lab-grown diamonds. So what kind of gear do you need to be able to discern a lab-grown diamond from one that's pulled out of the ground in Botswana? Yeah, so the fascinating thing is any jeweler anywhere in the world with a 30X loop or a 10X loop cannot tell the difference. Only specialized labs like the GIA or IGI can. There's very small nuances that are different. So for example, lab-grown diamonds are nitrogen-free, and natural diamonds have small traces of nitrogen. Ironically, the most sought-after natural diamonds are also nitrogen-free, the Golconda Type IIa diamonds. So ultimately, is this about the pricing? Do people buy this because of the social aspect of it, because it's a better thing to do for society, or are people buying it because it's more affordable? So Gen Z is doing it for both reasons. If you're buying a two-carat diamond engagement ring, you're spending $25,000 on the natural product, $2,500 on the lab-grown product. So clearly that's super compelling. But there's also much more sustainable. It's grown in a lab. So for each diamond that comes out of the earth, there's one ton of dirt displaced. That's not the case with lab-grown diamonds. So, I mean, someone like me who knows nothing about the industry but has seen a Leonardo DiCaprio movie assumes that all real diamonds are kind of like blood diamonds. Is that an unfair assumption? That is an unfair assumption. Yeah, so there's Kimberly processes there, and all jewelers are Kimberly process-compliant, which is diamonds have to be ethically sourced and produced in mind. So they are perfectly ethically made for 99.9% of diamonds, and especially everything sold in the U.S. So that is not a worry. That being said, you are displacing one ton of earth for every carat of diamonds. Here's the thing. An engagement ring is a massive investment. And if you're making that investment, what I'm wondering is, when it comes to lab-grown, and I thought this way. I see it as a token of love, but you see it as a financial investment. I see everything as a financial investment. Time, money, everything. So when you think about the investment, what is a lab-grown diamond worth in 10 years, 20 years, 50 years, 100 years? Is it a depreciating asset? Or do you think that it actually has a chance to go up in value? So lab-grown diamonds will not hold value. So to resell, it's very difficult. That being said, natural diamonds have gone down in price by 40% to 45% over the last three years. So the typical reason somebody bought a diamond is for two reasons. One is financial flex. So if you're wearing a 2-carat to 3-carat ring, it says something about you. The other is it's an inflation hedge. You used to appreciate 2% to 3% faster than inflation. Both of those things are no longer relevant because you could buy the lab-grown equivalent for 90% less. And they've depreciated 40% to 45% over the last three years. Right, I'll be honest. My jeweler said that the only disadvantage to buying a lab-grown diamond was the ability to resell it at the diamond district. And it looks like you're losing that ability with the real one as well. Yeah, apparently. It's dropped that much in value. Tell us about your business. How is Ungara doing right now? What kind of growth are you looking at? Our growth is in the high 20s, and we're growing very quickly. We've been growing at 30% per year for the last 10 years. We crossed $100 million in 2022. We expect to reach $1 billion in revenue in 2030. We're pretty unique compared to most other jewelers in the sense we're completely vertically integrated. So we'll buy gemstones and diamonds from mines. We'll cut and polish those gemstones. We'll design our own jewelry, manufacture our own jewelry, and then retail over the web. UK, Australia, Canada, as well as the U.S. We just launched in India. We're just launching in the GCC countries end of this year. So we're growing very quickly. Do you want to stay independent, or do you see yourself selling to a larger jeweler? For us, this is a 50-year game plan, and we're year 20 into it. We would like to stay independent. It gives us a lot of flexibility. We like to be able to sell natural and lab diamonds in color and really promote color, and that's what we're all about.