Struggling to make next month’s rent, you might be tempted to dig out some necklaces and rings you don’t wear and try to sell it to your friendly neighborhood jeweler. But you might actually be buying a ticket to a sick magic show. The jeweler performs a blistering series of slight of hand tricks, whipping out calculators, spouting off fees, keeping your eye on the supposedly worthless diamonds under a tenth of a carat while double-deducting for the base metal. By the end, you slink out in a dizzied blur, accepting 1/5th of what the piece is actually worth. In this exclusive excerpt from the latest issue of Harper’s, ex-jeweler Clancy Martin takes you on a journey to the dark underbelly of the jewelry game.

Why is there so much money in the buys?

There are too many contrivances for me to describe them all here, but the simple explanation is that it’s a radical case of what George Akerlof first described as the Lemon effect (as in “buying a lemon”) and Kenneth Arrow and other economists call information asymmetry: a problem for classical economics that occurs when the seller has more information than the buyer.

Here’s one of the tricks. a jeweler puts your bracelet on the scale and tells you your eighteen-karat gold is 75 percent gold, 25 percent valueless metal. (True.) So he takes the price of gold, converts it to grams—shows you how he is going from the ounce price to the gram price, which already has you slightly dizzy—and multiplies by 0.75. Then he deducts 15 percent, which is his cost for the smelting process. (False— average is 5 percent, on the high side, and depending on volume it can run as low as 2 percent.) Then he deducts 10 percent: “That’s my profit. I only make 10 percent on the deal, but there’s not much work involved.” Finally, he deducts 25 percent for the alloy, which is the base metal mixed in with the gold to make the bracelet hard enough to wear.

Spelled out step-by-step like this, you see the swindle: he has deducted for the base metal twice, at the beginning and at the end (or, depending on his particular patter, somewhere in the middle). But, all done in front of you, his fingers flying across the calculator, it’s legerdemain; it goes on right under your nose.

Diamonds under a tenth of a carat? “Worthless. They cost more to pull than they have value. Plus they usually break when you remove them.” (Completely false—and anyway, he’s probably not going to melt the piece down; he’s going to clean it up and resell it to someone like Marek Nowack.) Big stones like amethysts, turquoises, and topazes? “We have to deduct for the weight, I’m afraid; they’re just colored quartz. You can have them back if you want them, but we have to charge you to pull them.” You never take him up on this—by then you are so discouraged you simply want your three hundred bucks for the piece worth fifteen hundred to the jeweler and to slump on home. Sterling-silver sets? “They’re so common, they all go to the smelter.” (False: a nice sterling set, even if incomplete, will bring four or five times the weight of the silver from an antique silver wholesaler.)

Occasionally the jeweler hits a real home run: an employee of mine once bought a three-carat yellow diamond in an antique pendant thinking it was a very sparkly citrine. Of course, it didn’t really sparkle until he cleaned it, and that is another trick of the trade: when the seller brings in her jewelry—often very old jewelry—it is usually filthy. The buyer tells the seller that the dirt and particles of skin are actually inclusions in the gems. He brings out a loupe and encourages the seller to inspect the jewelry more closely, so she can see how full of “flaws” it is.

– Clancy Martin

Seller beware! More juicy tidbits are revealed in the rest of the Harper’s article All That Glitters: An Ex-Jeweler Reveals the Art of the Swindle, from the June issue, currently out now.

PREVIOUSLY: Ex-Jeweler Dissects “Buying Roadshow” Ads

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