I Sell Diamonds: Contrast In Methods

Louis Kornitzer's book, Gem Trader, is partly autobiographical and partly woven round the lore of pearls. It's educational + explains the distribution chain of gems, as they pass from hand to hand, from miner to cutter, from merchant to millionaire, from courtesan to receiver of stolen goods, shaping human lives as they go + the unique characters in the industry.

(via Gem Trader) Louis Kornitzer writes:

I told you that I ‘broke’ three times into diamond trading. The third occasion was when I was introduced to a prominent Antwerp diamond cutter in New York. For some reason he took to me, perhaps because I visited him in a nursing home when he was bored and ill. At any rate, he pressed me to come and see him when I reached Europe, and four weeks later I sat in the great man’s office in the Rue Coquilhat in Antwerp. He was a prince among men, although he could scarcely write his own name, and the outcome of our chance acquaintance was that I was associated with him over a period of six years, during which time my firm distributed throughout China, Indo-China, Japan, the Philippines and Malaya the stones which were cut in my principal’s Antwerp establishment. The strangest thing about it all was that he knew nothing about me; almost equally strange was the fact that although he had the largest diamond factory in Belgium I had never previously heard his name.
‘So you are specializing in pearls,’ he said, ‘and are operating in China at present. Why don’t you go in for diamonds on a large scale?’
‘For the best reason in the world,’ I said, laughing. ‘It takes me all my time to finance my pearl business.’
‘Oh, money be damned,’ he returned. ‘You can buy from me all you want without cash. Your paper is good enough for me.’
‘But paper has to be met,’ said I. ‘And I can’t see myself getting a single night’s sound sleep if I were to buy beyond my strength.’
‘That puts a different complexion on the matter,’ he smiled. ‘But although if you want to sleep, then sleep you must; I had thought you of the calibre of a big merchant who is out for big things and to whom sleep is a secondary matter. How much sleep do you think did Napoleon get in all his life?’ That was no talk for serious merchants. It was foolishness got up as the essence of wisdom. However, while he was still speaking he told his head clerk to bring out the classified series of brilliants which had been finished that morning.
‘These are the class of goods that sell in China,’ he said. ‘You may not know it, but I am well informed on the point. The series comes to approximately £40000. You can make your fifteen percent on it as easily as you can kiss your hand. Will you buy it if I guarantee you a profit?’
A friend who had introduced us in New York sat by my side and I looked at him.
‘Henry,’ I said, ‘I haven’t touched a brilliant for years, I am not au fait with values, I am a steady goer, I take no wild plunges, and my paper if I give it has to be met. Tell our friend here to look for other customers.’
Henry, who was a great expert on brilliants and had for twenty five years never lost touch with the diamond market, and who loved me as a brother, said: ‘Buy!’
I bought the lot; it came to over forty thousand pounds, and I paid with my signature. I did not know then what I had let myself in for. But of that more anon. I shipped the goods out to my brother, who was then in charge of our Manila office.
Suddenly I remembered, even as the goods were on their way, that you might buy diamonds for £40000 on tick if the seller had faith in your integrity, but that the American Collector of Customs in Manila would want to see the color our money before issuing a clearance certificate for the goods. Fifteen percent ad valorem meant £6000 in Customs duty, and this was an outlay which I had not figured on before I had left the Islands. In great perturbation I mentioned this little fact to the seller. He laughed.
‘I gave you credit for forty thousand pounds, so I may as well make forty six thousand,’ he said, grabbed the phone and instructed his bank to make cable transfer to Manila of £6000 in our favor.
That shows you what sort of a Napoleon my credit was. Two weeks later, having been in the interim in London, I went again to Antwerp. I called on my friend. He shook me warmly by the hand and said, without further parley: ‘Your luck’s out. The bottom has fallen out of the diamond market since you bought that parcel from me. You can buy the identical goods today at twenty five percent below the prices you paid me. Can you stand a loss like that without making a fuss about it?’
‘It’s bad news,’ I said calmly, for a man who has been knocked out by a hundred pound weight is quite calm in a manner of speaking, ‘but I have four months in front of me and the East is a big place. In any case, I now have a good reason for not sleeping at night.’
‘Do you know what I would do in your place?’ he asked.
‘Are you going to give me some good advice,’ I said with a wry smile, ‘or do you propose buying the goods back from me at a discount?’
‘No,’ he said, ‘I’m merely asking what you think I would do.’
I pondered. ‘If one were sure, could be sure, that there would be no further drop in price, the obvious thing to do would be to buy another one hundred thousand pounds’ worth of brilliants at today’s prices and strike an average, always provided that one had the cash or the credit and a market to absorb the goods.’
‘Precisely,’ he said, ‘and that was what I was going to suggest to you. I have another series of goods similar to those you bought of me. It does not come to a hundred thousand pounds, but close enough to sixty thousand. I advise you to buy; there will be no further drop; if anything, there will be an upward tendency almost before you can ship the stuff out.’
I inspected the goods. My heart was in my mouth. What was I about? Had I any right to commit myself to such heavy payments? If I bought the parcel I was staking all upon one throw of the dice; if I did not buy it my loss on the first purchase would limit my resources severely for some time to come. As I fumbled with the corn-tongs, idly picking up first one then another flashing stone, not knowing what decision to take for the best, a voice said in my ear: ‘Leap!’
I turned to my creditor. ‘All right,’ I said, ‘you can invoice the lot to me, but easy with the whip when you fix the dates of payment.’
The same day I received a cable from my brother in Manila: ‘Market here gone to pieces; buy nothing, ship nothing.’
‘A fine kettle of fish,’ I commented to myself, but ate a hearty dinner—like the condemned man—and went to a show. What was done was done. Within a week I sailed from Marseilles, China-bound, carrying with me in the purser’s safe the second folly which was to wash out the first.
I was lucky, very lucky. Within ten weeks from the date of my arrival in China I had liquidated for spot cash all my purchases, and had entered into an arrangement with my Antwerp supplier whereby we operated jointly in the Far Eastern markets on a fifty-fifty basis—he to buy the rough and cut it, I to have sole distribution. For six years the association held between us, until civil war in China, an anti-luxury campaign in Japan with its incident legislation, and a tin and rubber slump in Malaya were decisive factors in determining me to beat a retreat before the crisis, which had already taken toll in many good names in the diamond trade at home should claim mine, too.

I Sell Diamonds: Contrast In Methods (continued)