Nurit Rothmann: Playing The High Stakes Game With A Marked Deck Of Cards

Opinion piece
07/03/2016 21:01

More than 600 Israeli diamond manufacturers have signed a letter that calls on the bourses to support a decision taken by the World Federation of Diamond Bourses, which is meant to improve transparency in the rough diamond trade. If enforced, it will greatly reduce the level of risk that has for so long been part of the business.
Let’s think for a moment about a game of poker. All those around the table understand that, even though some players may be more talented than others, the mathematical risk is equally distributed.

But now imagine that one of the players knows what cards the others are holding. Could the game continue to be played out fairly, with even the losers walking away satisfied that they had been provided a fair shot? Clearly not. Indeed, it is unlikely anyone would have even joined the game if they realized that the risk was unevenly distributed.

Until recently the rough diamond trade shared certain characteristics with the game of poker. While the talent, experience and knowledge of rough traders definitely were factors, the internal characteristics of a stone – which ultimately determine its value on the polished diamond market – were concealed equally from all participants. Like poker, rough diamond trading can be a high-risk business, but it is one that we agreed to join because the rules were fair.

But then something happened that undermined the premise of equally distributed risk, and that was the development of technologies that enable one to analyze the interior of a rough diamond, revealing its real economic value. To return to our poker analogy, it was as if spectacles had been invented that empower the wearer to see what cards all the players around the table are holding.

Now ask yourself…. In poker, if one or more of the players are wearing those spectacles, should we expect the other participants in the game to continue playing? Almost certainly not, but in the rough diamond business some would disagree.

The game changer was Galatea, which is a system developed by a group of Israelis that was purchased by Sarine Technologies in 2008. It enables the comprehensive and accurate detection and mapping of inclusions in rough diamonds, and in so doing potentially eliminates much of the risk that has so long been part of the trade.

Game over? Not so quickly. Galatea reduces a buyer’s risk as long as the buyer is able to use it before making the purchase. It’s common sense, surely. You would ask a motor mechanic to check a used car for hidden defects before actually buying it, and not afterwards, correct?


But what is common practice with used cars is not necessarily so the rough diamond business. The following is a far more likely scenario….

Buyer A purchases a rough diamond for a considerable sum, let us say $1.8 million, on the assumption that it will yield one or more high-quality polished gems that provide a healthy profit. But after submitting the stone for examination using Galatea technology, Buyer A discovers that the stone’s potential value had grossly been overestimated.

Buyer A is left with two choices, either to absorb the loss or to sell the rough stone to Buyer B, most probably at a modest profit. Guess which option is chosen!

So Buyer A has created the baseline, and each time the rolling stone is sold, the price edges upward. Eventually, however, Buyer C, or Buyer D or Buyer E decides to cash out and cut the diamond. Only then does he discover that he is holding a losing hand.

Once upon a time, the last buyer in the chain would have considered the loss fatalistically. After all, each of the earlier buyers had the same set of choices, because the risk was equal. But in the Age of Galatea it is always possible that one or more of the buyers in the chain was playing with marked cards, knowing full well that the stone being sold was worth considerably less than what was being asked for it.

In the Age of Galatea it is unlikely that the person who was burned would ever agree to do business again with the individual who sold him the stone. The rules of the game have changed.


The creeping level of mistrust in the rough diamond trade, brought on by a conscious lack of transparency, is proving devastating. Friends of mine, some of them respected manufacturers and even sightholders, have left the business disillusioned. Colleagues are switching professions, looking for more stable and more promising prospects in other fields. 

Was this another business sector – the pharmaceutical industry for example – we would assume that full disclosure was being practiced from the very beginning. And this is what we should aim for. With the technology that is today available, mining companies would ideally sell rough with Galatea reports, enabling the first buyer in the chain, and all those who follow, to make a properly informed purchasing decisions.

But before that goal is achieved, there are other steps that can be taken. In fact, some already have. More than two years ago the World Federation of Diamond Bourses (WFDB) decided br that, while a diamond dealer is not necessarily obliged to reveal the results of a Galatea analysis, he or she is obliged to inform a potential buyer that such a report does exist, and this should be confirmed by a laser inscription on the stone.

This cannot be defined as full transparency, but it definitely is a move that encourages transparency.  The problem is that the bourses, which are expected to implement WFDB decisions, have been slow to follow through. However, one that was ready to pick up the gauntlet was the Israel Diamond Exchange, but it found itself almost alone.

In the meantime a group of young Israelis, most of them second-generation diamantaires, have established a group whose goal it is to encourage as many bourses as possible to join the WFDB initiative. Their mission is to salvage the ethos of integrity in the business, and the response has been overwhelming. In just several days more than 600 of their peers signed on. Something good is happening.

It is my fervent hope that this movement for greater transparency, with the courageous support of the Israel Diamond Exchange, will reverberate throughout the trade. Manufacturers will come to know that, if they want to reduce their level of risk and optimize  their chances of getting a fair return on their investment, it would be wise to purchase rough where the business is more transparent.


Unlike poker, it is not a foregone conclusion in the diamond trade that there inevitably are both winners and losers. In a transparent business environment it is altogether possible that all players in the chain come out winners, just as in a non-transparent business environment the industry has whole may ultimately lose.

Neither is it a foregone conclusion that your colleagues seek to deny you earning a fair profit.

Jonathan Fields, an entrepreneur and the bestselling author of “Uncertainty: Turning Fear and Doubt Into Fuel For Brilliance, “ recently posted a blog about Chris Guillebeau’s Adventure Capital program, which among other things assists business enterprises in bringing a products to the market, generating both buzz and sales.

At the end of Jonathan’s post he gave his readers two ways to visit Chris's page:

Option 1 was an affiliate link, for which Jonathan made an honest disclosure that, for each person choosing the option, he will receive a commission.

Option 2 was an ordinary link, which, as Jonathan explained, would yield the same result, but would not generate any commission.

What Jonathan sought to discover was the percentage of his readers who would be satisfied with him benefitting from providing them a service, versus how many would prefer to avoid the possibility of him benefitting, even if it costs them nothing.

The results of the experiment were eye-opening. Some 76% of his readers selected the affiliate link, and so contributed to Jonathan’s income.

Do you know why? Clarity and transparency enhance trust, outweighing suspicion and misgiving.

If you provide people with a fair choice, their inclination, generally, is treat you equitably. It is a lesson that we should learn.

Nurit Rothmann is a 22 year veteran of the diamond industry. A trailblazer and innovator, Nurit is dedicated to lending enlightenment to the often shrouded world of rough diamonds.
Founder of N. Rothman. Nurit specializes in brokering major rough diamond deals, managing diamond tenders, promoting, branding and logistics managing of diamond projects. Publishing well researched reports on the market.
She is the co-founder of the Women Diamantaires Forum in Israel.