Then there's the diamond market, a complex yet loosely structured system that's part souk, part multibillion-dollar global exchange. This curious blend is what makes Diamond Stories: Enduring Change on 47th Street such an engrossing read.
Ninety-five percent of all diamonds imported into the U.S. pass through New York's 47th Street between 6th and 7th Avenues. Author Renee Rose Shield provides a rich, rare glimpse into how this secretive market operates. High-tech wizardry? Not here. Men sit across from each other, throwing back and forth pieces of paper stuffed with diamonds. It's virtually unencumbered by formal contracts. Breaches and disputes are settled through arbitration.
INSIDE THE VAULT. How can such a complex, high-stakes market function in this way? To answer that question, Shield, who is related to several diamond traders, takes readers high above the raucous, bustling sidewalks of Midtown Manhattan and into the Diamond Dealers Club, a high-security "human vault" located in a nondescript office building off Fifth Avenue. It's in the DDC that business is carried out via a sophisticated web of social relationships, which the author explores through interviews with actual traders.
The scene she sets is surreal: long tables with men sitting across from each other, waiting to be shown a dazzling stone like no other. Traders, who carry expanding wallets filled with diamonds enclosed in elaborately folded paper parcels, sit and toss these parcels to one another. When a diamond catches a potential buyer's eye, he'll examine it under a loupe.
All the while, the men are schmoozing, complaining about business, trading stories and jokes, and engaging in what Shield refers to as the "dance of deal-making." When an offer is finally accepted, the parcel paper with the stone is placed in a small manila envelope with the buyer's name written across the seal.
GETTING PERSONAL. The players' fascination with all the aspects of the business -- moving and showing stones, buying and selling, matching orders and expectations, negotiating terms of credit -- is what emerges most strongly. And while the market for diamonds may seem unique, it has much in common with the stock, bond, and commodities markets: Diamonds are actually quite abundant, almost a commodity, really. The market is linked globally, and information, rumor, and "noise" affect it and its participants.
What's unique to the diamond business is the level of trust that predominates and the importance of one's personal reputation. "Even when deal-making is private, people know whether you are behaving correctly, suspect whether you are succeeding, doubt whether you can be trusted," Shield notes. "In a profound way, one's life is an open book."
While Shield is an anthropologist by training, Diamond Stories is more a well-told tale than a scholarly book. And although it does tell the story of diamond mining, beginning in 1867 with the discovery by an 8-year-old boy of a pebble later identified as a 21-carat diamond, the book isn't a history of the diamond cartel. That story has been told more fully elsewhere.
MARKET MUSTS. Likewise, Diamond Stories doesn't go into much detail about the diamond trade's effects on Africa, though Shield tells how the illicit trade has financed civil wars throughout the continent. At the same time, she notes, diamonds have been a positive economic force in nation-building in Botswana, Namibia, and South Africa.
And while diamonds may be synonymous with Africa in the popular imagination, Shield points out that the gems are actually mined throughout the world, with the biggest, most recent finds coming in Australia, Russia, and South America.
If the Internet Revolution and the scandals roiling the deregulated markets in energy and telecom have shown anything, it's how hard it is to create a market. From Diamond Stories, we can extrapolate a few key ingredients for success: trust between the participants, a high level of energy and excitement, and, finally, something that has been overlooked by most economists and theorists -- participants who revel in the joy of exchange.
Diamond Stories: Enduring Change on 47th Street, by Renee Rose Shield
(Cornell University Press, 288 pages, $29.95) Rosenberg is a contributing editor for BusinessWeek Online