Diamond Wholesaler Reveals How the Industry Really Works: De Beers, Lab Grown vs Natural

Ari Berkovich [00:00:00] They're buying a diamond for literally like a fraction of the cost of a natural diamond. Now keep in mind the only difference between a natural diamond and a lab grade diamond is where the rough was created. One, one was mined out of the ground and one was created in laboratory conditions and very special reactors that basically projecting high pressure and high temperature literally mimics what happens in the crust of the earth. The only difference is in instead of like literally millions or billions of years, that it takes a rough to be crystallized in nature, a shortcut it for about two, three weeks. I'm

Vance Crowe [00:00:36] Steven Fairbanks, a writer and teacher from St. Louis, Missouri, and you're listening to the Vance Crowe podcast. Welcome back to the podcast. I'm glad you're here. Today we sit down with Ari Kovich, who is a diamond wholesaler. I don't know about you, but I've always been suspicious of the diamond industry. It's one of those things that people know a diamond is forever. They know all the campaigns to try and get young men professing their love to a young woman to spend a whole lot of money on a thing that doesn't seem like it gets much use. So we sit down with Ari to figure out like, why are diamonds valuable? What does it take to create a diamond? And what is the whole world of buying and selling and moving these things around? Look like Ari is a fascinating character that really has a view on the world that we don't get very often, and if you do, it's because you're sitting across from a salesman. But for this rare chance we get to sit and listen to somebody talk that isn't selling us anything at all. And so we get to ask the tough questions. We're gonna get to that interview in just a moment. But this week we did a couple of Legacy Interviews. They were really powerful. It was a couple that came in and they described their life story that they built together. One of the things that I learned from the conversation was that two people could be completely different from one another, and yet that's what really made them work as a couple. Even during the interview, they had different ways of telling stories. They had different things they thought were funny and different things they thought should be included.

Vance Crowe [00:02:09] But when I go back and look at the conversation they had together, that's where the magic was. You can capture their laughter together, their gentle touch and just the whole dynamic of them. We're excited to be delivering these interviews and if you would like me to sit down with your parents, regardless of how well they get along and tell stories, then go to Legacy Interviews dot com to find out more. A quick housekeeping note, thank you to everyone who came over to the Fountain app. I am astonished with how many of you took the time to download the app, but it is great now you are able to listen to podcasts and get paid in Satoshi's, a really, really tiny unit of Bitcoin. And then without doing anything at all, you can decide to give those satoshi to the podcasters that you like listening to the most. I think that this is a powerful way to create a dynamic between an audience and a podcast producer. So thank you so much to the people that join there and know that it is a really easy way to make comments on the podcast, to be able to communicate with other listeners and really derive more value for value, which is what I love doing. All right, we're gonna head to the interview with my man, Ari Kovich. Ari Kovich, welcome to the podcast.

Ari Berkovich [00:03:25] Thank you so much for having me.

Vance Crowe [00:03:27] How many months should a person put into their engagement ring?

Ari Berkovich [00:03:32] As far as like a monetary value or,

Vance Crowe [00:03:34] Yeah, this is the thing that everybody always says like, oh, it should be three months salary or six months salary. Is this a real thing?

Ari Berkovich [00:03:41] It is. I, I think it was the beers advertisement that came somewhere in the late fifties, 1950s where they said, you know, it's, it's two and a half times of your monthly salary. That's what's accepted, you know, in our, in western society as far in engagement ring. But you know, I think it's a fad because everything changed in our world. I mean, back then, you know, people would get a job and stay on that job for years, right? So they really had a projected income for many, many years. Today, people changing jobs so often and they can afford diamond rings much more than they can afford 'em back then for many reasons. One of the reasons is there's competition. You can buy a diamond anywhere. You can buy a diamond walking into the big box stores or even a Walmart or even Costco or you can just know a guy or know a jeweler like a fine jewelry store. And it's very interesting that we live in an area that seems like everybody has their jeweler. Everybody has somebody that took care of their family over the years. So really, I mean the consumers are in the driver's seat in the sense that they buy a rank for whatever they can afford. They don't live up to like a certain standard traditionally, like you know, there's kind of like a silent competition if you are within a group of friends, usually they all get engaged and and married around the same time.

Ari Berkovich [00:05:13] I think that that sets the tone a lot of times.

Vance Crowe [00:05:15] Yeah, I think it's interesting you're talking about people being kind of the, having a different situation. I was just reading about Peter Hitchens who's this commentator over in the UK and he was describing how much England has changed that if you go back and look at photographs of people from back in the day, they were almost all wearing the same clothes. They were almost all doing the same things. And when television came around, then this prompted people to say, the way that I can be unique is I'm going to have different clothes than everybody else. I'm gonna be different. And so it's funny that I, I imagine the DeBeers like thing probably really did work out well for people to say, ah, this is what I need to do in order to be normal.

Ari Berkovich [00:05:55] I think, yeah, I would agree. I think it worked for them. At the same time, they're definitely like in charge of, you know, where diamonds and, and you know, the jewelry as, as a whole industry I is is at today. I mean in the respect of, they definitely put on the map the fact that you have to have a diamond ring in order, like to get engaged or to ask for someone's hand. So back in the day, I think that it was really accepted that you could give someone a promise ring what it means there was just a piece of just a gold band. It didn't have to have any gemstones or any precious stones. Like diamonds could have just spent, I don't know, 20, 30, $40 on just a silver or a gold or a platinum band and you would be, that would be sufficient enough to at least like secure your spot with with, with your significant other.

Vance Crowe [00:06:51] Yeah, I knew so little about this when I got started because I was the first among my friends to get married and I didn't even realize that you buy a ring after you buy the engagement ring. I was like, isn't the engagement ring the wedding ring? Like, I just didn't know.

Ari Berkovich [00:07:06] And I think a lot of people probably are definitely confused about that. I think the beauty of engagement in general, and I I I'm saying that 'cause I see a lot of the younger generation really struggle with that today is, and engagement is, is a testing period for, for both people. And I think that's the beauty of it as well in the state of Missouri. And again, I'm not, I'm not super special when it comes to like divorce law or anything like that, but it's definitely a contract when you give someone an engagement ring, it's a condition for your marriage. And not only that, some, some courts look at it as a gift in the condition of if, if the marriage did not happen, you can actually ask for it to get it back. And some courts look at it and, and I'm saying that because every state it's different. Some courts say no matter what's gonna happen, whether you stay together or not, or you complete the process of getting married, the woman or the guy gets to keep the rank. So I will go back to what I was gonna say about younger people today are, it's very common for them to live with each other way before they're getting engaged. Where if you go just one generation back, it was a big no-no, it has nothing to do. Whether you grew up like Christian, Muslim, Catholic, Jewish, you know, especially if a woman wa was leaving their parents' house to live with a guy without that ring on her finger without like that commitment, you know, it was, it was definitely frowned upon.

Ari Berkovich [00:08:49] It was taboo.

Vance Crowe [00:08:51] I do these Legacy Interviews and I get to hear when people are telling like what really happened and what I think is going on, there's, there were a lot more old people living together that like would never have told their family about it if they weren't like the, the reason I say this, 'cause I've heard so many people be like, well we maybe did, you know, he was away at school. And so we would go. But I think it was like something that had to be kept hidden in a way that definitely wasn't. Now I know for myself, right?

Ari Berkovich [00:09:18] My

Vance Crowe [00:09:19] Wife was not, we were not moving in together until we were engaged. Like that was,

Ari Berkovich [00:09:23] I I'm the same, yeah, I'm the same way. When I met my wife, she had her condo and I had my house and it was very clear that until I was specifically going to propose her to marry me, I mean I, I didn't even have like any idea if she would even wanna move in with me. Like I, I knew that I had to like commit to her at some point 'cause she was so independent still is, and that, that's the beauty of it. I think there's a lot of people that actually jump into marrying someone without having to, you know, spend time together having that independency and, and then they move in together and getting married around the same time. And I think they don't have that buffer to kinda see if they're right for each other. Yeah.

Vance Crowe [00:10:06] And the engagement point period, which you are totally right, this is important.

Ari Berkovich [00:10:11] It allows you that

Vance Crowe [00:10:11] It allows you, and you also now get to see like I used to think marriage was really about just the two people that are getting married. No way. You're marrying her family, she's marrying your family a

Ari Berkovich [00:10:21] Hundred percent.

Vance Crowe [00:10:21] You're figuring out how do they handle things, right? That party, that wedding, you think all that this is all about us. No, it's about like how are these families going to come together? How do decisions get made? And you get to be in that firsthand seat where real money is being put down real commitments. Like how is all this going to work? And I wish I would've known this before because I think that that I went through a lot of suffering, resisting what was just, just the family. It was just what you were getting into as opposed to trying to figure out like how do I, how do I make it so we get the wedding we want understanding like this is a community thing and it's really like how do we make the wedding that makes it so our families grow together.

Ari Berkovich [00:11:05] I would agree. I mean I think that it's definitely that engagement ring allows you to have the time that you need to really understand if you write for each other, but also planning the wedding together. I mean there's a lot to be said about that. Some people take a year, some people take three years to plan a wedding. But I think there's something magical about that engagement time. And I'm not speaking about it as a diamond wholesaler slash diamond dealer. I'm speaking about it as someone that was single for, for a very long time. I did not propose to my wife until I was like 37.

Vance Crowe [00:11:43] Oh wow. Okay. And

Ari Berkovich [00:11:44] At the time we were dating for almost three years, so the trigger was we started going to a lot of weddings and if you're taking your girlfriend to weddings and she's not sure what's her status, it's kind of a big deal. And and it dawned on me, I mean I, and I knew that I have something very special. I mean she's an incredible woman and I, you know, everybody has doubts. For me it was just the fact that we're really, our upbringings were like in different backgrounds. You know, I grew up in Israel, I'm Jewish, she grew up here in Waynesville, a small town and she grew up Catholic. It was the, it wasn't the religion, you know, aspect of it as much as just, you know, there are certain things and radically

Vance Crowe [00:12:32] Different cultures. Your food is different. How you treat mom and dad is different.

Ari Berkovich [00:12:36] Correct. Luckily the similarities and really the, the shared values that we both grew up with are almost identical. You know, she is the oldest of five girls and they're, they're all very close to one another and they're very close with the parents and the grandparents. And they grew up in this environment that very hardworking, you know, middle class, huge respect to the community and and to their cousins and their, their family, their extended family. So very similar to the way I, you know, I was raised and, and growing up in Israel is, family comes first, you know, I mean, and that's, that comes definitely you feel it more in high holidays, obviously like everybody else in the country today. But you also feel it when you're in need or when you, when something doesn't go well for me, unfortunately. I mean, and I'm saying unfortunately I missed that part because, you know, I, I left by choice. I left my country at a very young age. 'cause I had basically an opportunity of a lifetime. I studied geology right after my military service and met a guy that told me like, Hey, if you really want to succeed in this business, it's not like being in a laboratory conditions, you know, grading diamonds all day. You have to be out there and sell. And it was a hundred percent correct.

Ari Berkovich [00:14:09] So

Vance Crowe [00:14:10] Yeah. So let's talk about this. Like what attracts someone to geology? Like what, why did you get pulled in this direction?

Ari Berkovich [00:14:17] I think it's fascinating. I knew a little bit about the business at the time. Israel was probably number one exporter of diamonds in the world. I'm talking about like early two thousands. So post nine 11, something very interesting happened in the world. The demand for diamonds actually almost doubled itself in less than a year.

Vance Crowe [00:14:41] Why?

Ari Berkovich [00:14:42] I think for the most part, when atrocities and, and things on the scale of nine 11 happen, more and more people actually looking for, you know, that emotional security and, and a lot of people tied the knot around that time. So the demand for, for diamonds was huge. 2001, 2002. That's the time that, so I didn't move to the US until 2002 to, to do my internship. But I remember actually one of the very first cities that I landed to in the United States was Phoenix, Arizona. It's funny 'cause we're, this weekend there's a Super Bowl out there and it was very interesting at the time because it was like a gold rush in Phoenix. I remember like people from LA and Las Vegas was moving there and it wasn't as big as it is today, obviously post, you know, 21, 22 years back then there was just an amount of wealth. I mean the middle class was very subtle and, and all you've seen is like just those brand new exotic cars everywhere. Golf courses. Yeah.

Vance Crowe [00:15:53] Scottsdale is blowing up. The golf courses are going up in the Arizona, in the Phoenix area.

Ari Berkovich [00:15:57] Exactly. So I remember that time and I had that point of view of starting in the jewelry industry in the diamond business. The business was booming. I used to work for a diamond cutter and one of their partners that I've done my internship with would turn out to be one of my best mentors. He's still living out there, Gabby, he showed me the ropes and everything. But he, he had probably some of the best years in his career around that time.

Vance Crowe [00:16:28] And what is it, you, you go out, you're in geology school, you're grading diamonds, you're just like holding them up to the light and looking at 'em. What are you doing?

Ari Berkovich [00:16:35] Yeah, so essentially if you are a full-time geologist, you, you can land in the many different environments, situations. One of them is working for a large laboratory like GIA or a GS or there are many different like companies that grading diamonds and producing reports to diamonds. One of those, you know, I, I had an opportunity similar to that, but it wasn't really appealing to me just because of the scenarios sitting in an office or a laboratory condition all day. And you know, it gets boring after a while, especially if you, if you scale and you do it like on a daily basis, you can see dozens of diamonds every day. It's just something about you. It's just like becoming very numb about it. And when I studied gemology, I've seen it because a lot of the testing is okay, grade this and grade that and it's fun in the beginning. 'cause you're excited about discovering like different qualities and different ratings and especially when it comes to like color diamonds, natural color diamonds. That world is fascinating. And I remember vividly like actually knocking on doors while I was like still in geology school. And it was around that time that you had to have some blood relation to those diamond cutters. It was very hard to, especially in Israel. I mean it's families that came from Europe post World War II to Israel.

Ari Berkovich [00:18:07] And a lot of them were actually forced into the diamond business. I know it sounds like crazy, but a lot of people didn't have a choice but to convert their wealth into something that is relatively easy to travel with.

Vance Crowe [00:18:21] Oh,

Ari Berkovich [00:18:22] And diamonds and obviously gold and other things is, is one way of doing that. That's how a lot of the Jewish population in Europe, specifically like the Netherlands, Belgium, that region, they, they got into diamonds because of the war.

Vance Crowe [00:18:39] And so did you have a blood connection to diamond cutters? I

Ari Berkovich [00:18:42] Did not. I was very lucky. I was one of like seven or eight people with the company that hired me at the time. The David OV group that actually hired me based on my talent, based on what they thought I was capable on doing. Which is they weren't sales guys. They wanted people to go out there and sell. They didn't want people sitting in a lab or they didn't need any buyers or people going to deal with what we call tenders. People that go to deal with like the rough side of the business. So the diamond industry is very similar to real estate. You've got a lot of different industries, sub industries within the whole industry. So one thing is interesting, I'm dealing with the final product diamonds that are cut and polished and ready for a jeweler to use for a setting, for a ring, for earrings, for anything they wanna set it in. So the rough side of the business is the whole nother level of, you know, dealings and, and understandings and, and completely different set of buying skills. It's beyond what you learn in geology. You need to be able to look at a crystal that just came out of the ground and and really see the potential of what are you gonna cut it to, you know, which today obviously with technology you've got 3D scanners and other tools that help you do that. But the guys that were like dealing with rough until this day, that's all they do.

Ari Berkovich [00:20:16] They don't know the business as well as I do when it's the final product and vice versa.

Vance Crowe [00:20:21] So if we go through the path, it's somebody mines these diamonds and then they sell them as little rocks that are kind of milky white kind of things. I I, I guess I'm basing all of my knowledge off that movie. The Adam Sandler one. What was that called?

Ari Berkovich [00:20:36] Oh my god, that's a horrible movie. Really.

Vance Crowe [00:20:37] I loved it.

Ari Berkovich [00:20:39] It's very authentic. 'cause I think like talking about the guy perfect. Got an addiction. Yeah,

Vance Crowe [00:20:45] Yeah, yeah. A gambling addiction. Yeah,

Ari Berkovich [00:20:47] Something gem. Uncut gems.

Vance Crowe [00:20:49] Uncut gems. That's what it is.

Ari Berkovich [00:20:50] I didn't like it because it portraits like a lot of the jewelers, especially the ones I deal with in the Midwest, they're nothing like that guy. That guy was like sleazy drunk.

Vance Crowe [00:21:02] Yeah.

Ari Berkovich [00:21:03] She's

Vance Crowe [00:21:03] Not his wife and doing all kinds of stuff. Right,

Ari Berkovich [00:21:05] Gambler

Vance Crowe [00:21:05] Fair enough.

Ari Berkovich [00:21:06] Yeah. Taking stuff from people on consignment and does whatever. None of that shenanigans, I mean most of the jewelers are not only that, they're reputable and really good people. They've been in business for generation generations and generations. So imagine that I would sell to people in the Midwest that some of them been been around for over a hundred years. You know, think about it, it's like three, four generations of guys that they don't send their kids to school because it's obvious when their child like finishes high school is back in the shop either polishing

Vance Crowe [00:21:44] Or

Ari Berkovich [00:21:44] Working on watches or on the floor selling jewelry.

Vance Crowe [00:21:49] And so there are the uncut gems or whatever that come to a buyer that says, Hey, I think we can cut this thing into a diamond this way. I'm willing to buy it in bulk. I'm gonna buy this set of, of like how does all this work?

Ari Berkovich [00:22:02] So just to organize for our listeners and for you in in a nutshell what's happening in, in in this world that it it's divided by, you know, who's controlling what, right? The beers as, as a mining company, they still have a large stake. They probably control closer to like 30% of, of the diamond rough in the world. They have certain mines in countries like Africa and I mean many different countries in Africa, I'm sorry. And in Africa itself, it really divides to a lot of like private miners per se that are not part of the beers. That they're basically contracting some of the locals to do the work and actually creating those communities of minor of of mining working force that that does what they're expected to do. Back in the nineties obviously you, you heard the term over and over again conflict diamonds or as people call it blood diamonds.

Vance Crowe [00:23:08] Yeah.

Ari Berkovich [00:23:09] And that that happened and probably still happening because some of the mining countries have a lot of like unstable regimes. Obviously Angola, you know, it's a small country in Africa is a good example of that. Or Sierra Leone or Botswana. Those countries that unfortunately had gone through so many like corrupted government and changes and what conflict diamonds really mean is that a lot of the activity, the militias, the revels that working in those countries, they use diamonds as a vehicle to either launder money or use it for terrorism.

Vance Crowe [00:23:54] Yeah. In my perspective, like anytime you have a a, a good that you can go out and just with pickaxes or shovels go get it then is very easy for there to be conflict over that, right? It's whoever's the strongest that can control that zone. It's not like going out and doing deep sea oil well drilling where you gotta have engineers, you gotta have people cooperate, you've gotta set up all these things. So to me, like I know when it was popular people talked about that stuff, but like it's, it's bound to happen, right? Anytime you're gonna have something where you can just go out and as long as you control it, you can like that, that's gonna create conflict. It's gonna be conflict around all minerals that are like that

Ari Berkovich [00:24:31] A hundred percent. I mean I'm just gonna leave it here and I'm not, 'cause I think that would open up conversation that is beyond what I do. But the way we use energy for electric cars today is mined in a very similar way. The diamonds are being mined. So I think in areas where you have natural resources and elements that you have to extract and mine out of the ground, some of the local, you know, manpower has to help you do that. And what happened between that point and actually until whatever maker, whatever manufacturer that's going to process and handling that element is doing within that process there there's a lot of things that are not very kosher. And to me, when people automatically think that electric cars are the answer for, you know, sustainability and, and less carbon footprints and things like that, I think they're in the wrong. I mean I'm not against electric cars god forbid, I just, I think that people don't, don't really realize what it takes for lithium or cobalt or other elements that are ne necessary to bring the car to that point. There's a lot of things that are very similar in my industry that are happening that I know a little bit about. But obviously you have to jump through a lot of hoops and a lot of red tape in those countries of origin to get that, to get it to the US or to get it to China to get it to Europe or wherever they manufacture, whatever the end consumer is gonna use.

Ari Berkovich [00:26:11] And

Vance Crowe [00:26:11] So we get these mind diamonds, they go to somebody that then,

Ari Berkovich [00:26:16] So back to what I was explaining, the beers, because they're controlling almost 30% of of that sector, they created something that's called siteholders. So the beers taking siteholders and if you're a site holder, you have a contract with the beers for X amount of years and once a month you're getting a box with those crystals. Again, the quantity, the carrot weight, that's something that is set behind the scene. A lot of times actually those siteholders don't really know what they're getting, but they cannot refuse those boxes. Basically a box shows up in your office, whether you're in South Africa, Tel Aviv, Antwerp, you can be anywhere in the world and if you refuse that box, basically that license, it's like licensing to buy rough diamond and cut him is taken away from you. So other than the beers the other largest, you know, supplier of diamonds in the world, most people don't know that is elosa. Elosa is the Russian governmental country authority in diamonds. And obviously the Russian government is controlling, I would say about the same, about 20 something percent didn't

Vance Crowe [00:27:30] Do anything at all about them

Ari Berkovich [00:27:31] Of that market. So in the last year and a half since the conflict with Ukraine, obviously there's sent sanctions and definitely the people that used to buy rough from Russia specifically a lot of the product coming from like northern eastern part of Siberia. And again, not to get into mining, but if some of your listeners like that whole idea is completely different mining from a lot of the methods they mine in Africa in areas, in countries in Africa. And I'll give you an example. The de Beers family bought some land in South Africa back in the late 18 hundreds that was very rich in like what we call the the Kimber light. That Kimber light pipes, inactive volcanoes basically over time the rock, what we call like the actual gem quality diamonds would basically just surface. So there wasn't a lot of like, you know, mining to do. Again, it's a process. You don't just like go on the shore and pick rocks in the sand and you've got a diamond. There is some kind of like a sorting that is involved in this. But it's completely different than an open pit mining in Russia where you have to dig so deep, so deep in the ground that literally like you can see those holes from satellite imaging from face. Oh yeah,

Vance Crowe [00:28:52] Yeah. And they're like, they're, the holes just are absolutely mindbogglingly large.

Ari Berkovich [00:28:56] Correct. And and I would say in my opinion, yeah those holes can be environmentally, you know, becoming an issue over time. In fact, there's like no fly zone over those open pit mining because there's such a like air circulation that creating like this suction effect that helicopters and planes cannot fly over those open pit mining.

Vance Crowe [00:29:19] I didn't know that.

Ari Berkovich [00:29:20] If you want to Google specifically, there's, and I know because the company that I used to work for eventually they became my, my suppliers, my vendors back in 2007. The business changed a lot and they wanted nothing to do anymore with selling to the retailers like I do. They just wanted to go full tilt into cutting into manufacturing. So they started working with directly with miners in, in Russia and a lot of that, and by the way, the, the quality, the natural diamonds coming out of those mines is spectacular really as far as like the gem quality. Keep in mind a lot of the industrial diamonds that are being mined out of the ground, relatively easy to process compared to white diamonds. Stuff that we would use for jewelry only two point a half, 3% of all the diamonds that are being mined off the ground, you know, are being used in, in jewelry. So think about it, people think that it's just, it's a marketing scheme where de beers is, is pricing a one karat, let's say for seven or $8,000 for a specific color and clarity. I don't think that it's considering everything that's happening behind the scenes and all the moving parts and and all that processing of mining and cutting and certifying the diamonds. It's definitely expensive and there, there's a reason why it costs the way it costs.

Vance Crowe [00:30:51] So people are mining all these diamonds. There's a bunch that go to industrial uses and then some 2% goes to like, hey this could go to people that are willing to put the time and effort into making them from this rough rock into something beautiful.

Ari Berkovich [00:31:05] Correct? I mean look, there's a lot of other private miners that can be contracted to do other things with them. But for the most part, when somebody's mining in areas where literally they know what they've got and they know that there's some really good quality of gem quality diamonds in those mines, they, they're exploiting that they, they're not letting it go and they're doing everything they can to optimize, you know, the carrot weight and the color and clarity out of each rock that comes out of that ground.

Vance Crowe [00:31:39] And when somebody gets a, a raw diamond or this crystal as you're calling it and you're gonna turn into jewelry, what, what's the next step?

Ari Berkovich [00:31:47] There's a lot of steps. I mean, so there's a lot of different categories. Again, I'm not coming from that rough field, but the raw diamonds, the, the rough we call it rough material has to be categorized because you've got different forms and different shapes. The most valuable ones are usually what we call like sables. The ones that you can literally saw down the middle and create, imagine like this cone head, you know, double-sided cone heads crystal that you just saw in the middle. If you look at a dime in any shape, it has the pavilion and it has a crown. So it, it's a beautiful thing to see that when you find a very valuable rock, everything kind lines up and you can cut it and obviously maximize the weight. And then if it happens to be a really clean and white material, you hit, you hit the jackpot.

Vance Crowe [00:32:41] And so,

Ari Berkovich [00:32:42] But it's not always happened that way. A lot of, a lot of the rocks that they find has to be actually broken to the part where you can lose 65% of the original weight just to cut a single rock.

Vance Crowe [00:33:00] And so you, the people that are in you know, starting to do this cutting, they, they get this box and they say like how much do they know about what this is gonna look like when they're done with it?

Ari Berkovich [00:33:12] It's a great question. I mean a lot of them don't, I mean and with all the years of experience that they have and average manufacturer in diamond business takes them about 16 to 18 months of a cycle just to like understand their p and l and their profitability from that box.

Vance Crowe [00:33:32] And so are they polishing it right there? Like what the person that gets that box, some

Ari Berkovich [00:33:36] Of them are a one-stop shop, a lot of them, you know, they've been in the game long enough that it's better and more profitable for their business model actually to flip it to the next guy. Some of them will work on like literally like two 3% but you know, an average box worth millions. So they're willing just to take that low of a margin and just flip it to the next guy And the cutters usually that have outlets and and have the clients and the consumers on the other end, they're the ones willing to pay because they really know how to market it and, and and control the price,

Vance Crowe [00:34:15] The cutter. That's I think where I'm trying to aim towards. 'cause when when I was looking at diamonds for the first time, I always thought like oh you just find them and then you shine them up and then you've got it. But that's not at all what's going on. You've gotta take this rock and say what do I think it could look like?

Ari Berkovich [00:34:32] Correct. So you've got a lot of technology tools today that assisting those cutters. One of them is the seren machine. It's a company actually it's a technology that was developed in Israel in the early eighties. They are 3D scanners that's scanning and all of a sudden like rendering that piece of rock turning into a 3D file and basically by polishing we call it like scheffing, a very small window. You can take your scope and look inside that crystal and say, you know what, there's enough inclusions on that side that we can kind of eliminate and diamonds like the bigger, the cleaner and the wider the rock is, that's part of like the four Cs, right? The more money you get for that crystal. So every cutter's goal is number one, what is the biggest rock I can get out of that crystal?

Vance Crowe [00:35:28] Oh and shape it so that I'll, it'll look beautiful and be clear correct that it'll be as large as it can be

Ari Berkovich [00:35:34] And the scanner does it for you. The scanner basically tells you out of this like eight or nine or 10 karat rock, you can get a two karat pear shape, a half a karat round, a one karat emerald cut. One guy I think that does it very well with his marketing and he is a one stop shop is graph jewelers. You know, they're definitely notorious for being like similar to all the other high-end jewelers like Cartier or Harry Winston. They mark up their diamonds four or five times but they're literally like going to tenders and they're going to all those auctions they're buying, they're diamonds from private miners and they go through the entire process until it literally goes into a diamond ring and by the time it goes into a diamond ring we are in show me state, right?

Vance Crowe [00:36:27] Yeah.

Ari Berkovich [00:36:31] That is a three karats,

Vance Crowe [00:36:32] Whoa

Ari Berkovich [00:36:33] Oval diamond just on a simple solitaire. And you know, to get to that level of what this diamond has been through, if you look at the process, a lot of people look at the certs and they look at the date that that diamond was actually certified. But that doesn't reflect when that diamond was cut. You know, it could be two years before that when it was actually mined out of the ground and processed. So there's a lot that goes behind the scene just to get to that part. Obviously the larger the diamond is in natural diamonds, the higher the price point is.

Vance Crowe [00:37:10] And when, when I look at, you know, a diamond, you see the flat top right here and then you've got like little triangles or little diamond shaped things.

Ari Berkovich [00:37:18] Diamonds have facets. The top that you're referring to is the crown. When a diamond is being set, you only see the crown, which is the top part of the diamond. Diamonds are being cut in a way that they act like a a prism for, for light. And you know, there was a physicist that back in the day, his name was Snell, when he realized that there's different gems and different diamonds, he actually started experimenting with light in optics and wanted to find the optimum angles for for light. But he discovered something very interesting. If a light hits a surface in of any object, especially something as shiny as a diamond, it would actually leave in the exact opposite angle to the other direction. So when they start cutting diamonds, you probably heard the terminology ideal cut. It's not just enough to cut the diamond. You wanna optimize on how well you can build the ratio of the crown and the pavilion to be able to allow the light to get inside the stone traditionally from the crown bounce around and leave. 'cause if the, the light doesn't leave in a certain angle, what you're gonna end up with is that means the diamond is usually too deep and the face up of the diamond will look dark, it won't shine and bounce like a white diamond should. And if you cut it too shallow, the light will traditionally will leak from the sides.

Ari Berkovich [00:38:54] So there's a lot that goes into it. And that's a great question because when dealing with rough, and I would not want to be that guy to decide how to cut the diamond because obviously you don't just start faceting the diamond in that step. You have to saw it first to separate, to separate the rock.

Vance Crowe [00:39:12] So there's like three diamonds in there and we wanna cut 'em out and be like, we can get an emerald cut out of this and a cushion cut out of this. Exactly.

Ari Berkovich [00:39:18] And it's a very slow process 'cause only a diamond can cut a diamond and it can take literally like three to five days just to separate two pieces. 'cause you're putting a lot of heat and diamonds are being created by, you know, high pressure and high temperature in nature and in laboratory conditions today, which I will get into. But obviously you want to control that heat, you can't heat it in one spot. So you basically have to do a lot of maneuvering just for the sewing process. Then you have brooding, you've got like polishing, you've got faceting and then we, we call it like the final part is like the Berlin deer, which is just giving it like that light touch of making it, giving it the shine that it needs to, you know. So it's, it's a process and obviously some guys, especially big cutters that cut a lot of the smaller stones like India specifically in Bombay, they're geniuses. They have some automated machines that they can leave it overnight to do the sewing for them. You know, those scanners will guide, I dunno if you've ever seen a polishing, we call it moula, I dunno if you, it's like a big polishing wheel that spins in a specific RPM again depending on the size and the shape of the crystal. And you literally have to apply the paste that's consisted of diamond dust and that's what helps you polishing and and cutting pieces of the diamond.

Ari Berkovich [00:40:54] And again, it's a slow process. So there, there's a lot of automation going on today with sensors for temperature and heat and pressure that allow those machines to cut some of the time that people are doing it by hand. So keep in mind like a lot of the cutting, probably 80% of the diamonds you see nowadays are still being cut by hand.

Vance Crowe [00:41:19] So when I look at one of these diamonds and I see like, oh this is a beautiful little angle right here. Like somebody chose to put that in there or that's naturally what was a part of the, of the diamond itself.

Ari Berkovich [00:41:32] You're talking about the shape itself? Well like let's just

Vance Crowe [00:41:35] Say,

Ari Berkovich [00:41:37] You know, so this is all like my collection. This is the stuff that I take around the stores. Yeah, these

Vance Crowe [00:41:42] Are unbelievable. I can thank you. Thank you. So, so

Ari Berkovich [00:41:44] This is a four karat, this is an emerald cut, believe it or not. The oval you just looked at that is a natural diamond. The four karat emerald cut that you're holding right now. It's actually a lab created diamond. This is a manmade diamond. Okay. They both share exactly identical atomic structure, same hardness and same everything. And that's what scares our industry today so much. The lab created are a thing, you know, I mean it's definitely accepted by some of the new consumers out there for a simple reason that they're buying a diamond for literally like a fraction of the cost of a natural diamond. Now keep in mind the only difference between a natural diamond and a lab created diamond is where the rough was created. One, one was mined out of the ground and one was created in laboratory conditions and very special reactors that basically projecting high pressure and high temperature literally mimics what happens in the crust of the earth. The only difference is in instead of like literally millions or billions of years that it takes a rough to be crystallized in nature, they shortcut it for about two, three weeks.

Vance Crowe [00:42:54] And is there some test you can run to determine that one's created in a lab and the other one's created in the ground? A hundred percent.

Ari Berkovich [00:43:01] So to the naked eye, even for me is a jeweler, if I just take my loop to it, 99% of the time be impossible tow unless it's laser inscribed. So a lot of the diamonds, especially the ones that I carry, I separate the two products by laser inscriptions. So on the girdle on the belt of the diamond, what connects the crown and the pavilion, you can hedge the serial number and a lot of times it will have the acronym lg if it's lag grown or will not have lg, if it's a natural diamond we'll just have the report number on it. So that's just a nice safety feature, not just for guys like me, the sellers. It's actually more of a safety features for the consumers to know what's in their ring.

Vance Crowe [00:43:48] Yeah, because there is something too, like the sensation of knowing this diamond was created somehow, naturally. And this one, you know the like, it feels different. It's just like artwork. You could have, well we were talking at before we got started about prints, right? You could have literally the exact same Mona Lisa, but it feels very different if it's the one painted versus the one that was just, you know, copied at Kinko's or something.

Ari Berkovich [00:44:13] You know? That's a good point. I don't know necessarily that I would compare the two and I, I can totally understand why you're asking it. That's what's so cool about the technology on one hand because you do need to have a very special tester that actually test other elements than just the carbon, than just the diamond. Those optical testers basically. So I'll give you an example. A natural diamond has presence of nitrogen or in some cases in some colors could have boron. They only exist in the ground, whereas some of the lab created diamonds will have more metallic inclusions and some things that can only be concluded while that diamond was crystallized in laboratory conditions. So, you know, a lot of people saying, well lab grown are much more green and better for, you know, the earth. I, I doubt that and here is why those reactors use like an enormous amount of energy. And I'm not against lab creative diamonds. I mean I personally as a diamond vendor, I I love them because there's inventory, you know, when you, when you get specifics and calls and demands to create a piece of jewelry from jewelers or from individuals, some of the natural diamonds, especially in, in fancy shapes, like anything that is not around like ovals or emeralds or pear shapes, there's some serious issues in in inventory.

Ari Berkovich [00:45:51] There's scarcity is is a real thing. You know, the, the demand that we've had in the last five years is huge. Social media has a big part of it and the fact that every 20-year-old today that's getting engaged wants to have at least one carrot, it's a big deal. You know, our parents, my mom, she had a quarter carat diamond and she was as happy as she could be, but we're living in a very virtual visual world. Everything is very visual and people look up to influencers online and they want diamonds to be relatable. Obviously natural diamonds are not relatable when you start talking about it. We carry a diamond, you know, in a natural diamond in a higher color and clarity about $60,000 that is not relatable to a 20-year-old that just got his sense job.

Vance Crowe [00:46:49] Yeah.

Ari Berkovich [00:46:50] But a lab created a diamond at a one carat that he can buy for $3,000 is a little more relatable and affordable too. So I think a lot of people look up to those influencers and it's not that they want to be them, but they want to be inspired and do something that,

Vance Crowe [00:47:09] I mean, I believe in a concept called mimetic desire, right? Where, where there's so many things for human beings to want in the world that, that our brains like try and take shortcuts by saying, well what are other people that I admire? What do they like? And I wanna like that too. And I don't think there's any way around it, right? If, if you know, like we find out the symbols that mean something in our lives and then we go towards it and there's nothing even wrong with it. It's just being aware that that is how the human mind works.

Ari Berkovich [00:47:36] A hundred percent. I also think that a lot of the perceived value between natural and and lab creative diamonds, people are looking at it like the wrong way because it's supposed to be a very emotional purchase. In fact, you know, when you see a guy, usually it's guys, you know, walking into a store, it's definitely one of the largest items they've ever purchased other than a car. Oh

Vance Crowe [00:48:05] It was by far the most expensive thing I had ever bought.

Ari Berkovich [00:48:09] And you can tell by the time they decided they're gonna pull the trigger and propose to the one they get really excited and really emotional about it. And at that point they forget all about technicalities of color and clarity and measurements. 'cause if you go online, it will give you a headache. Most people think that they know because they do an extensive research and, and there is a lot of really good information online. But to an extent, I, I always recommend obviously talking to a person that's been doing it for like the longest time and that's what they're talking about. Just like any other field. But I,

Vance Crowe [00:48:52] Well we should even talk about like what is your actual field? 'cause you're not the guy dealing with the, the young 20 something that's got love in his heart and wants to get married. You are dealing with a totally different group of, well not a totally different but a different group of people. Yeah.

Ari Berkovich [00:49:05] So the majority of my business is wholesale and I sell to jewelry stores that have been around for generations. So my sale is, is is tough 'cause I have to sell to people that know as much as I do and even more about the product. So it's a very competitive market, but at the same time I enjoy it because this year is actually my 20th year in business. I have some strong relationships that I can literally like leave something on consignment with my jewelers on a handshake, you know, and it's their word and it's my word and, and that's it. And it's, it's a very unique business in that sense that you can do it that way. You know, you can hardly leave a restaurant today without paying a $10 check. Right? But I've developed like this relationship where I can walk into a store and if they need something, I can just leave it for them to show to their client. Or if they need to buy something for stock, I give them my word that I, I get it on the specific time they need it for my suppliers overseas and, and they know it's gonna get there and they know it's gonna be exactly what what I described and they know that it's gonna be the price I quoted them.

Vance Crowe [00:50:25] So when I think diamond wholesaler, I'm imagining the movies where you like open up a little pouch and there's like a bag of diamonds in there.

Ari Berkovich [00:50:33] So I wish they would be more, you know, focusing on the small details but almost, I mean, you would not throw a bunch of diamonds together no sack because they'll scratch each other.

Vance Crowe [00:50:49] Di diamonds have cullet and

Ari Berkovich [00:50:51] They're very hard and they're very sharp. In fact, the diamond is the hardest, you know, mineral in nature. It's like hitting like 10 on, on the scale of hardness. So that would be actually silly if they, if they did it that way. But especially the larger stones, you'll find them more individually wrapped in what we call parcel paper. Parcel paper is just a special paper that you carry the diamonds in and yes, you, you do travel with that showing the diamonds that way when they're loose, when they're set already. I mean it's, it's much easier to look at the diamond and describe it and even imagining what it's gonna look like by the time that it's a finished piece of jewelry. I think that's where a lot of consumers are confused because they look at diamonds sometimes when they're not being set and it's very hard for them to vision what it's gonna look like by the time that they're gonna be in a r. So back to what you said earlier, I think that diamond wholesaling is, is tough because you can sell, your revenue can be consisted of like millions of dollars a year, but you're working on a very, very small margin. So like I said, you have to have a very high volume and get to those big revenues, but at the end of the day, you've got a very high traveling expense. The logistics is very expensive and your insurance is, is one factor that especially if you're traveling with the goods to other stores, it's a very, very expensive insurance to have.

Vance Crowe [00:52:27] Yeah. You mentioned, 'cause we were talking about kids before the thing got started about traveling. Yeah.

Ari Berkovich [00:52:31] So

Vance Crowe [00:52:31] You, where are you flying to to to, and what are you doing when you get there?

Ari Berkovich [00:52:36] So when I meet with my suppliers, traditionally it's overseas. I go to Israel multiple times a year. That's where I'm from originally. And it's very convenient for me because I have people that I literally started in the business around the same time that their kids started in the business. You know, so we, we go 20 years back and we have such a fun relationship, but when we sit down to do business, it's business, you know? And, and it, it's another, it's a beautiful thing because not everybody know how to do the switch on and off between friendships and, and business. Especially if you like the client, you have a supplier but you also have to be friends with them. At the end of the day, it's a special relationship that you, you need to learn how to keep.

Vance Crowe [00:53:21] Yeah, there's this psychology to selling. I mean you almost never wanna buy somebody from some, you never wanna buy something from somebody that you don't feel like is your friend, but also you don't wanna let your friendship be harmed by the business and the business. Exactly. Like it's a, it's a very touchy thing.

Ari Berkovich [00:53:37] It really is. So buying is one thing obviously with technology today, a lot of the diamonds that I bought the last two and a half years, some of the larger sizes were done online because when COVID hit, you know, it limited the way we can travel and move around. I did not have a month of my life, especially if it's small children at home. You can't just like leave everything and go for a month with quarantine and whatnot. So you started using more and more advanced camera system that is able to do a 360 of whatever gem or diamond that you're purchasing. So

Vance Crowe [00:54:18] Are you buying the diamonds one at a time when you're buying 'em, you're like, I want that one and that one

Ari Berkovich [00:54:24] On larger goods, larger quantities, you have to, because at the end of the day, you know, you don't have a room for making mistakes in this business. 'cause a mistake means that you either overpaying for something 'cause you missed either an inclusion or you missed something. A flaw could be like an extra facet or something about that diamond that it's okay if it's there, but it might not be for your client. So it's very situational and then you'll be basically stuck with it at the same time. You might buy something that the price is right, but you know, it was wasn't the right timing to buy it. Diamonds are not a commodity like gold. Think about it. I mean gold, you can, you can look at the spot of gold and the, you know, stock market and say gold today is 1900 for

Vance Crowe [00:55:22] Yeah my one ounce is two ounce. Exactly. Yeah.

Ari Berkovich [00:55:25] You can't do that with diamonds. Diamonds have so many different qualities, like there's color and clarity and there's probably over a hundred different combinations, D to all way down to Z as you go up in the alphabet, D being like the whitest, as you progress up in the alphabet, you're actually going down in color and then you've got clarities, you've got anything from flawless and then you've got vss, which is very, very slightly included. Those are literally like microscopic that that consider good. That's like really clean materials. And then it jumps all the way down to I one I two, I three, which I one means that at least 45%, 50% of the diamond is heavily included. People are buying those qualities. But you have to keep in mind every diamond is gonna be different and you, every diamond is gonna have different eristics, meaning that the origin and the area where it was mined, it can have black carbon spots, it can have feathers, it can have clouds, it can have needles, it can have cavities that were created during the cutting process. So there's a lot to look into and there's a lot of, a lot of it has been mentioning on the certificates, not all of it, but you really have to look at the overall appearance. I always tell people don't get caught up in looking at the certificates. They're important to have as a documentation of what you purchased or for appraising purposes.

Ari Berkovich [00:57:01] But at the end of the day, you have to look at the diamond. It is very simple. Do you like it? Does it speak to you? Does it shine, does it do a little dance? If it doesn't, it doesn't, the cert can say that it's de flawless and everything checks on color, clarity, cut grade and so forth. But you don't like it so you don't buy it. That's why I have a hard time understanding like people buying from like third party platforms online because they're using, they're using somebody else's inventory and they're just suggesting whatever the, the, the laboratory is indicating that the diamond is. But even if they have a video, nine out of 10 times, it's, it's just a stock video. It's not really an actual 360 video of the diamond. So a lot of people are just like buying it more in the dark in my, in my opinion.

Vance Crowe [00:57:56] Yeah. And what, how much could a person know about diamonds if they're just a lay person? I mean, at the end of the day, it really comes down to, to finding somebody you trust. I would guess

Ari Berkovich [00:58:06] A hundred percent. And it's, it's the million dollar question Vance, because the majority of the younger population today, I think they, it it's time factor, obviously factoring in time, some of them are very busy, so I get it. They don't always have time to go and meet with someone, but I think for a lot of them is intimidation just to sit and talk or walk into a jewelry store. It's very intimidating for them. And of course I'm generalizing. Well,

Vance Crowe [00:58:33] I mean, I think that's probably true because like there's an asymmetry to it. Right? Exactly. So for the person that's selling it, and you've had a business for 20 years, this sale is not going to make or break you. But as the person buying it and it being your largest purchase, like your anxiety about making a mistake, about, about, you know, doing something wrong, about whatever, about her even saying yes is way up there. So there's an asymmetry there that that, that if you could avoid it, I can imagine the temptation would be really strong.

Ari Berkovich [00:59:05] Correct. And as a supplier, I see a lot of like mistakes being made by the consumer. I'll give you an example. Somebody walking into a jeweler, he's been working with that jeweler for a month, creating the, the dream ring for his girl. And after the proposal, the girl was like, I hate rounds. I wanted an oval. Or I don't like this emerald cut. I wanted a pear shape. Or whatever the situation may be. It's normal. It happens. I mean, you're not gonna, some guys take it like personally because they're like, well, I've designed it and I worked on it. And obviously if the element of surprise is there, most of the, most of the times they don't consult with their girlfriend. They just on a whim buy the ring that they like. I see it differently where some guys bring their girl to the store and let her be involved. But that's, that's more rare. So sometimes if you'd made that mistake, you want to deal with someone that is like, no big deal, nor harm nor foul. Like just swap it out to whatever shape she wants. You wanna keep the client, you wanna make them happy. It's, it's the rank she's gonna wear for the rest of her life. It's a big deal.

Vance Crowe [01:00:21] Yeah, that was, so in all transparency, I brought a sapphire for my wife, but that's only because I loved it. Right? Like I, I saw it and I thought it was the most beautiful thing I'd ever seen in my life. And I was like, this is what I, this is what I want.

Ari Berkovich [01:00:35] It's awesome. And I, I admire that you did that. I think there's no rules. A lot of people think that there's a very specific like template of how to do an engagement ring. And apparently there isn't. Even when it comes to like a matching band for the wedding band, for the wedding ring down the road, I haven't seen. And I can tell you just by looking at the trends that I see lately, there really no, there are no guidelines. So I think people are being really creative nowadays. The social media, Instagram, Pinterest is giving them a lot of legitimacy to be special, to be unique, to be creative. And I don't think that they think about like impressing someone other than just giving something that I think the sentimental value would be kept. And I think that's how a lot of the new generation is buying jewelry.

Vance Crowe [01:01:33] Yeah. I think back on it and I, my buddy had told me, 'cause I was like, it was so much money for me and, and like I had just really gotten my first serious professional job. I was working at the World Bank and I was out in DC so I actually for the first time in my life had money and I met this girl that I was like, this is the one I'm gonna marry. And I was like, but I can't imagine spending X dollars. And he was like, man, that is the one piece of jewelry that literally, as long as you don't screw this up is the one piece of jewelry she's going to wear for the rest of her life, it's go true. And that's when you're like, oh, okay, maybe it is worthwhile to spend some money on this.

Ari Berkovich [01:02:09] And I'll tell you that when you, when you do acquire beautiful piece of jewelry and you put a little time to design it, it it ab absolutely like, you know, make its impact. And I think, I think I set up at the beginning of the conversation because it's such an emotional purchase for a lot of guys and girls, I think that by the time they do it, they, it, it makes them very happy. Kind of give like this sense of pride, especially after they announced their engagement to their family or their close friends. It's, it's a very, very powerful evidence that you not only marrying this person, you are invested in them.

Vance Crowe [01:02:52] Yeah. Looking back on it now, I realize like one, it was a signal that our marriage was gonna be a little bit different, that I did something different. And the other was that, you know, my wife just accepting like me for the, for the person that I wa I, she maybe be wanted a diamond, but she never told me. Right. Like, and it was a very, to me that that's, that was correct, right? Like there was a lot of things about marriage that you can't know until you're in it, right? Until you're, until you're going through the marriage ceremony and you're like, oh, this wasn't about me. This is about bringing two families together, you know, on and on and on. And that's one that I think represents us very well.

Ari Berkovich [01:03:30] And I think it's also set the tone for the rest of your marriage because once you taste what it's like to buy a fun piece of jewelry, especially an engagement ring, it doesn't mean necessarily that you're materialistic and you're into luxury goods. I think a lot of people want their wife to be happy, especially after giving birth. You know, you see everything that they go through, you want to document and commemorate special events in your life. So sometimes people are like, Hey, I want to buy her something special like a pendant or diamond studs, or I want to give her like a push gift, a bracelet or, so I see it more and more where it's on people's radar, whereas maybe our previous generation was more conservative, they wouldn't buy as often. You've got so many beautiful options and price points, different price points today, especially with having a second product. Is the lab created that opens up like a whole nother world of just fun for people. Jewelry is fun. I think that, again, the previous generation was buying, especially like the heavy metal pieces, like gold chains were, you know, consisted of like 30, 40 grams for a chain. So people bought it as, as an investment because wow, gold is gonna go up. And yes, historically gold has gone up, no doubt about it.

Ari Berkovich [01:05:02] But you can't say the same about diamonds not natural and not lab created. I mean, diamonds are just not an investment. And it took me many years to realize it as a supplier because it's very similar to real estate. I, I, I hate to compare the two, but I'll for our listeners and people are watching this show, I, I have to break it down that way because when you buy your own home, your primary residence, you know, you don't look at it as an investment. You might fall in love with a house that has the kitchen that both you and your wife absolutely love and you might be overpaying for that house over asking price. But you fell in love with that house. You fell in love with the subdivision, you fell in love with the town or the school district that it's in and you bought it and 2, 3, 4 years down the road, it doesn't appraise when you go to sell it sell. It's the same thing with diamonds. It's always gonna be a markup behind the scene that you can't get back. Like guys like me or the jeweler that sold it to you or because everybody's entitled and has to make a certain margin. Some people make more margins than others. But I'm in an industry that the average Joe is wearing so many hats. You know, you're the buyer, you're the accountant, you're the clerk, you're the designer, you're the bench guy that physically do the hard labor

Vance Crowe [01:06:29] And

Ari Berkovich [01:06:29] The repairs. So you have to make a margin. And it's the same of the real estate industry. Residential, I don't know much about commercial, but look how many like parties when you buy a home between the financing and showing you the house, there's so many groups of people until like it's signed and sealed, then somebody funded your loan. It's a lot of moving parts behind the scene that everybody gets their cut.

Vance Crowe [01:06:57] Yeah. And once you run a business you realize like, whoa, like running this business is more than just what did it cost to produce that one single thing that's right in front of me because there are lights in this place, there was paint put on there, there's carpet underneath you, there's chairs, there's everything. And it's easy if you're a 20-year-old to be like, oh, I don't understand why these things cost stuff. But when you're running a business, like you understand everything is more expensive because there's a lot more costs in there than you would normally understand.

Ari Berkovich [01:07:26] I agree a hundred percent. And I think in jewelry, just like in art that you mentioned before, people do buy from people and there's gotta be some kind of a connection and trust. A lot of people walk into a gallery and if the artist himself happened to be there makes a huge difference of how they connect with that piece of art that they've purchased.

Vance Crowe [01:07:50] Yeah, I mean the story is everything, right? Like it's the, it is the, what is the narrative here because really at the end of the day, it's like objects right there. It's only value is what would somebody else pay for it. But there are so many things that it doesn't matter what you would pay for it, the question is what would I pay for it? So for example, a painting on the wall that might be worth literally nothing to somebody else, but if, if somebody tried to like buy it from me, the the the amount that you would have to pay pay me to give it up would be way higher than its physical value for paint and canvas in a frame.

Ari Berkovich [01:08:27] You have to really look at a piece of art and say, I see something that others don't. And when you do, you have to have the confidence to purchase it. And if you don't, you don't. But it's the same with deciding on customizing a piece of jewelry.

Vance Crowe [01:08:47] It is what you're doing. I mean like in a way it's being an art dealer, right? Because you're saying, look, this isn't an investment, this is something that you've gotta connect with and you're being an art dealer for the people that are actually dealing the art.

Ari Berkovich [01:09:00] You know, I wish I can look at it that way. I think because there's so much options and so many purveyors and suppliers in our industry, I think a lot of people can compare anything that they purchased to everyone else's, you know? But I would a hundred percent say if you customize something to someone that they were in the driver's seat the entire process and they wanted like three or four different elements from three, four different pieces of jewelry that they've seen, but it's theirs. And even if there's like a lot of like big no-nos about design, they still want to do it then I agree a hundred percent. It's, it's a piece of art and it's something that they took a part of. And who are you to tell them that, that piece of, obviously not some of the famous artists like that we've known, but somebody unknown who are you to tell them that this unknown artist and his piece on the wall is not pretty or doesn't do something to you. So I think that's kinda in a nutshell how you can compare the two and make a connection.

Vance Crowe [01:10:12] If you were breaking into a new, a new client, right? You're going to a new retailer, what is it that you tell them about what makes you different than the other wholesalers that are gonna come by?

Ari Berkovich [01:10:24] Patience. It's a great question. I mean, in, in my industry you have to have a lot of patience because the average jeweler, whether it's a large corporation or just a mom and pop store, that that does a million dollars out of that building. A million dollar a year is relatively an an average small store. You have to understand that most likely their capital is being used for other inventory than diamonds. I mean it goes to semi mounts and jewelry and pearls and payroll and just running things so people aren't having the buying power that they've had 10, 15, 20 years ago, years ago. So I look at it as if I have to finance a lot of deals and behind the scene of what I'm doing, look at, I started my business with 40 grand back in 2007, leaving that company that I worked for that mentored me by no choice. I mean they basically gave me a great opportunity to become an entity on my own. They did not give it to like 17 other sales reps they had across the country. And I knew I, I had to take it and not blew and I didn't blow it, you know, I just went for it. But I took that money and I kept borrowing and borrowing and slowly growing my business.

Ari Berkovich [01:11:59] It was all about consistency, but I made sure that I have strong enough relationships with certain banks. Some of them are local, but some of them also are, you know, big banks nationwide and always have the ability to have a line of credit and buy because when things are bad, the jeweler down the street is most likely not gonna buy, it's not gonna take the risks. And I don't blame them. They have other things and other hats and other things that they're doing. So they're relying on vendors like me. Obviously I'm not alone in this, but they're relying on how patient I'm, and I think that's what separates me from other competitors that I have is that I, you

Vance Crowe [01:12:43] Can, because you deliver them some diamonds and you say, I'm, I can wait for payment on those diamonds. I

Ari Berkovich [01:12:49] Can leave them pieces on consignment and give them enough time to work with those pieces and their clients. And only when they have a sale, only when they're sure that their client's gonna pull the trigger and pay them, that's when I get paid. And patience is, is not the right, it's basically a financing game. You have to be able to look at it as, as financing and, and some products like natural diamonds, I'll be honest, the margins on natural diamonds the last five to 10 years sucks. I mean, I used to be able to, to do 12 to 15% gross margins. Whereas today if I, if I get eight to 10%, it's like, wow, it's awesome. So if you add two, 3%, or in my case now with rates being as high as they are, four or 5% on

Vance Crowe [01:13:39] Oh for the money your loan and you're loan.

Ari Berkovich [01:13:41] If, if you had, if if you are financing the goods and somebody is taking their time or they're not paying you at, which unfortunately I had scenarios, nobody wants to have an account receivable. But I, I had, the years that I started actually had a pretty significant account receivable that, you know, the, the average aging days were was over a hundred days. That's, that's no fun. You know, you, you go to bed and you're like, you

Vance Crowe [01:14:09] Get a lot more gray hairs that way.

Ari Berkovich [01:14:11] A hundred percent show me one diamond dealer that doesn't have

Vance Crowe [01:14:15] Or

Ari Berkovich [01:14:15] Hair at all.

Vance Crowe [01:14:17] So you,

Ari Berkovich [01:14:17] So I, I had a lot of like sleepless nights in that regards, but it's, it's better now because obviously I think a lot of the jewelry stores that stuck around, they, they figured out the formula that works for them to, and and the size that works for them to not only survive but to be profitable.

Vance Crowe [01:14:39] You mentioned traveling around, you're going, let's say to Tel Aviv and you're looking at some diamonds, you fly back on a plane carrying a bunch of diamonds. Hell

Ari Berkovich [01:14:46] No. Okay. So you have third party companies that deal with, you know, shipping anything from coins to money to gold and diamonds. Those third party companies not only securing and insuring the goods, they're also acting as your agent. When, when it comes to customs and things like that, it's not worth the risk. Obviously if you were a smuggler you would just walk right in to United States, but it'd be silly to do because there's like four countries that have like a treaty trader agreements. So when it comes to loose diamonds, as long as it's not, when it's a finished piece of jewelry, it's, it's more complicated because there's like labor and manufacturing and recycled metals behind the scene that goes into it. So it's, it's a little different. But loose diamonds, there is an agreement between Israel, Belgium, India, and South Africa. And you can import them as long as you pay taxes, which I, I assume that if you're a reputable company, you do pay your taxes. You don't have to pay any custom fees to import, but you do pay your taxes when you sell the goods, your cost of goods sold and and so forth. There is a very small symbolic fee obviously for what we call port fees. But that's, that's very insignificant. You know, it's, it's, it's nothing. It's peanuts, it's basically on every million dollars you, you, you pay like a couple hundred dollars. The idea is that you can import and if something doesn't go well or you have returns, you have to send something back to, to your vendor.

Ari Berkovich [01:16:27] By the end of that fiscal year, you have the ability to do that without paying a fine or, or pay twice for customs. So it's very interesting. It's a very tight business. The way that I travel has changed obviously mainly being a, a father and my wife who I love is very successful as well. She's an entrepreneur as well. She has her business and physical therapy world. So we're trying to find the balance and, and we're very lucky 'cause I think we're living in a very exciting times. I know the environment in the United States, I've heard some of your podcasts regarding, you know, you know, cryptos and the economy in general. I think that the average person don't realize how much opportunity there's still out there and how many tools we have and how many great jobs people can grab or start their own business. We're still a very, very strong coun country in that respect. And trust me, I do have a good barometer because Israel is a wonderful country, but it's, it's not very easy on the, the small business owner. And, and, and I'm saying it very politically correct, there's a lot of red tape, there's a lot of, it's almost like they make it very difficult for small businesses over there. And the majority of my friends, not only that, they, they're not entrepreneurs over there.

Ari Berkovich [01:17:57] They, they have good jobs, but they, they definitely in that startup high tech world, which pays well and if you're knowledgeable enough, I mean it's, it's a very fast growing industry out there. But in the United States, I mean, you, you can start, if you asked me 20 years ago if I would succeed making in in the diamond business on my own with a starting capital of 40 grand, I would tell you hell no.

Vance Crowe [01:18:23] Yeah. The conclusion that I've come to is that you have to be aware that there's so much risk, but you have to just go past it anyway. Because if you really understood the risk or you understood how hard anything you're doing is gonna be, then you just wouldn't do it. And then like then where are you? And like this is a, you know, it's a harder thing once you have kids too, right? Because then all of a sudden you're not just like, well I could eat ramen. Like I know what it's like to be poor, that's not a problem. But now all of a sudden you're like, but I wanna be able to pay for my kids. I wanna be able to get them special things and make sure they have the right education and I want my wife to have these opportunities. And so now all of a sudden you're like, is it better to do the safe thing where I know the the highest point I can get? Or am I willing to take some risk? And then you look around at the world and you say, oh my God, look how much risk there is in this world. I don't, I don't know, I want to go hide away. But if you do that, like there's definitely a cap on how far you can go.

Ari Berkovich [01:19:23] It's true. It's, it's, it's a psychological thing for the most part, but it's also very geographic. I think we're very fortunate to be in the Midwest because obviously it's hard to say. I think cost of living rise everywhere, right? Everything is not what it used to be. But still we're very lucky in that sense that things are more affordable around here. And if you don't wanna live in right in the heart of Kansas City or St. Louis or Chicago, just you go slightly out to the suburbs and, and it's, it's a different landscape.

Vance Crowe [01:19:57] Oh, my whole life changed. When we finally got away from the idea that we needed to be on the coast. I was living with my wife in a 480 square foot apartment that looked out on a brick wall. And, and then for half of what our rent was there, we got a mortgage for a two story house with a backyard where I had a garage. And like, I mean like I instantly became wealthier as soon as I moved to St. Louis. But for so long I had constructed in my mind like these weird arguments. Like, like I was always like, oh, I wouldn't wanna be landlocked. Like it's not like I was going to the ocean when I was like in living in DC or New York for some reason I just had this, this concept in my brain. And I think that kind of concept has kept the cost of living down here.

Ari Berkovich [01:20:45] It's true. I mean I look at it as an immigrant that lived in other parts of the country and I can definitely tell you that not only that it's more affordable, I also had more opportunity to meet people as a single person in St. Louis. Just because, so I'll tell you a funny story. The company I worked for, their US headquarters was right, right outside of Washington DC in Rockville, Maryland. So you're probably familiar with that area. And I was about four weeks in St. Louis and set up setting up shop for my company at the time. And my boss, my old boss called me at the time and he says, how are things, how do you like St. Louis? And I said, it's great. And he goes, what do you like about St. Louis? And I said, you know, there's, there's a small talk around here, I really like it. And he's like, what? What do you mean? And I go, you know, you walk into an elevator and people just start talking to you and asking about the weather if you watch the baseball game. And he is like, he couldn't believe it. He was

Vance Crowe [01:21:47] Shocked.

Ari Berkovich [01:21:48] 'cause as you well know, you're like, if you're in the East Coast, forget about it. People barely say good morning. It's not that they're not nice, it's just it, it's a higher pace, it's a different mentality. Well

Vance Crowe [01:21:57] Go to a restaurant and like the waiter is financially incentivized not to care too much about you because what they want is throughput, right? They want as many people as they can. Whereas we would come to a restaurant in St. Louis and all of a sudden you'd be like, I I know the waiter's name and like we're chatting and it's a totally different dynamic.

Ari Berkovich [01:22:15] E exactly. So that's kind of how I met my wife. I, you know, when you're single, you're, you're forced to go out a lot by yourself sometimes because you're, you just, you're sitting at home and you're bored and you just get in the car and go. So I was sitting one night at Cafe Napoli at the bar, became really good friends with the bartender. Han Tron ha's a very well known person. I always joke that he's running a church. He's not really a bartender 'cause he knows so many people and connects so many people. And he said, and, and around that time I was dating someone, it didn't go very well. I was in a long-term relationship and it just ended. And so, so was my wife. She was going through the same thing at that time and he knew her and he said, I want you to meet someone and I think you might like her. So he actually introduced us, not that same moment, just basically exchanged at the time was like Facebook accounts and message each other and went out on a date. And since then the rest is history. But it was relatively simple to get to that point, to talk to the bartender and meet other people because again, go back to the amount of friendly friendliest level that we have here that we don't have in other areas. Same thing how I met Jared Holst, you know, very similar. You once you meet someone like Jared, there's definitely a social connector. I mean you pretty much set and, and St.

Ari Berkovich [01:23:45] Louis is definitely embracing here's the change in a good way that I've seen in the last 20 years. It's embracing more and more international community and people are more open to make this, this town more global ecosystem. Not just very narrow-minded about what's happening locally.

Vance Crowe [01:24:08] Yeah. My experience, you know, I've lived on both coasts. I've lived, you know, all over different countries and people have this perception that, oh the, the more important conversations are happening somewhere else. Like I can find as intelligent of people here as I could anywhere else. And in fact, some of the smartest people that I have ever been able to have conversations with I've met here. And I think a large reason for it is the network is large enough that there are interesting smart people here, but small enough that you can get connected to them. They're not, it's not like you're not anonymous everywhere.

Ari Berkovich [01:24:45] I would agree with that. Also, what I like is that you go somewhere and you can sit next to a judge or a hockey player or just the guy from down the street that is on a date with his wife. I mean it's, it's awesome that it's, it's big enough that it's convenient, but it's small enough that can be really good for communities and, and social life.

Vance Crowe [01:25:12] Yeah. And I think for me it's all about now like what's the best place to raise my kids? And like, I, I love it here, which, speaking of which, I gotta go pick them up. But I'm so glad you came by. I've never met a diamond dealer. I, you, we didn't even scratch the surface on so much of what, what you can talk about. So you gotta come, come back and we'll talk about you being in the Israeli military. We'll talk about cooking and running and all this stuff.

Ari Berkovich [01:25:35] I would love that. Thank you so much for having me.

Vance Crowe [01:25:37] So if people wanted to find out more about Diamond Wholesaling and stuff, just wanted to talk with you, what, how would they go about that?

Ari Berkovich [01:25:44] Sure. So the name of my company is Cherry Pick Diamonds. I named it Cherry Pick just because when I started I had to like literally like doing some cherry picking. I did, I had, you know, small amount of capital. So it's cherry picked diamonds.com and I'll have a lot of info on my website. I'm actually redoing my website as we speak and I'll even like tag on like, you know, our meeting today as a link.

Vance Crowe [01:26:07] That sounds good man. Well come on back. I'd love to have you.

Ari Berkovich [01:26:11] Sounds great. Thank you so much.