For many industry observers, 2023 will go down as the year that lab grown diamonds came of age. And as someone who had been forecasting this eventuality since 2016, I have enjoyed watching events occur that generally conform to my predictions made years ago. But I also find it fascinating that so many industry experts failed to properly anticipate what was going to happen, and so for this month’s article, let’s examine two fundamental psychological principals that when applied in concert may account for their failure to see what was coming.
You have probably heard the expression that someone “knows just enough to be dangerous”, an acknowledgement of the fact that people with a limited understanding of a specific topic may overestimate their competence in it. In the late 1990s, Cornell psychology professor David Dunning and his graduate student Justin Kruger conducted a series of studies examining scenarios in which poor performers in many social and intellectual domains seemed oblivious to deficiencies in their expertise, culminating in a landmark paper: “Unskilled and Unaware of It: How Difficulties in Recognizing One’s Own Incompetence Lead to Inflated Self-Assessments”. Journal of Personality and Social Psychology, 1999.
You can see the corresponding intellectual dynamics in the image: The Dunning-Kruger Effect Curve, which plots an individual’s feelings of Confidence versus actual Competence when learning a new subject. In the initial stages, the individual’s Confidence soars as they begin to understand rudimentary elements, culminating in the extremely dangerous scenario signifying their arrival at the top of “Mount Stupid”. Indeed, at this stage, while Confidence is at its zenith, actual Competence is still quite limited, especially if the topic is complex. And then suddenly, as a little more Competence is acquired, the individual realizes that they don’t know what they don’t know, precipitating a collapse into the “Valley of Despair”. At this stage, if the individual continues to study the topic and acquires higher levels of Competence, Confidence begins to be restored as they travel up the “Slope of Enlightenment” to arrive at a level of combined Competence/Confidence sufficient to allow them to hit the “Plateau of Sustainability”. At this stage, they may even achieve a “guru-like” level of understanding, where their knowledge of the subject matter enables them to infer answers intuitively, without discernible cognitive effort.
The four sequential stages in this journey (each section delineated by dots on the curve) can be summarized as follows:
- Unconsciously Incompetent
- Consciously Incompetent
- Consciously Competent
- Unconsciously Competent
So, how does the Dunning-Kruger Effect inform us as to why so many incredibly savvy diamond experts failed to see lab coming? It’s because of the insidious impact of a second psychological principle: Transference. Transference occurs when an individual mistakenly assumes that their high degree of competence in one arena automatically transfers to another.
I actually learned about this “Transference Effect” while getting my private and commercial pilot ratings back in the 80s. I had begun flying sailplanes to cure a fear of heights and had a series of terrific adventures flying with the owner of the Gliderport (who was also an FAA Examiner) where I worked (hence the requirement for the Commercial rating) as the pilot flying Mile High rides for two on weekends. These adventures included a number of trips getting flight time in his Beechcraft Baron, a light twin engine airplane that was fast, comfortable, and easy to fly.
But I also learned early on that Beechcraft Barons had a regrettable universal nickname: The Doctor Killer. Why? Because frequently, young surgeons who discovered the joys of flying raced through obtaining their private, complex, IFR, and twin-engine ratings, only to buy a Baron, and then fly it into the side of a mountain. Sadly, these low time pilots, who had extraordinary skills in the operating room, assumed that their Competence as surgeons would transfer to the flight deck. But as every student pilot learns, there are old pilots, and there are bold pilots, but there are no old bold pilots. And just as these doctors reached a level of transferred Confidence corresponding to the apex of Mount Stupid, their lack of actual Competence in the air led to tragedy.
So let’s put ourselves in the mind of an expert in mined diamonds, perhaps even possessing guru status. It’s 2016, and you start hearing about these new lab grown diamonds, and you even hear a few people suggesting that lab is likely to inalterably change the jewelry business, and potentially become the greatest disruptor of our lifetimes. And since you have tremendous Competence in the mined diamond arena, you believe that your knowledge transfers to this new lab phenomenon, which provides the Confidence needed to summarily dismiss lab as a silly idea that will never sell. And as events unfold, you remain steadfast in this belief, regardless of innumerable subsequent data points to the contrary.
The problem, of course, is that lab is not mined. It is a completely different animal, playing by a completely different set of rules. It may even be useful to recognize that thus far, the lab business hasn’t even started yet, because for the most part, the only lab sales occurring have been essentially cannibalization of mined diamond sales. I submit that in 2024, you will start to see sales that are actually lab-driven, by which I mean that rather than cannibalizing what would have been a mined diamond sale, you will start to see the first sales of lab grown diamonds that actually take advantage of lab’s unique properties. And this is when the real fun will start.