Scott Andrews Selby and Greg Campbell’s non-fiction page-turner Flawless describes the diamond heist of the century in Antwerp. [Greg Campbell previously wrote Blood Diamonds.] But along the way, the authors have an interesting discussion of just how essential trust is for the diamond bourses, even amidst all their multi-million dollar security, and the human efforts they undertake to ensure that trust.
The bourses formed in the late 1800s and early 1900s as clubs where diamantaires could wheel and deal with people who had been vetted by a membership committee.
The men in the Beurs voor Diamanthandel – as well as the three other bourses in the [Antwerp Diamond] district…could be as causal as their Pelikaanstraat forebears [who met on a park bench to exchange diamonds] because membership in the bourse was as reassuring as a Brinks truck. Someone walking in the front doors of any of the bourses would not get through the turnstiles in the lobby unless he was either a member or a guest of a member. Once inside the building, an invited guest could visit a private office but could not enter the trading hall itself unless he was a member of another bourse….
Bourse memberships were not granted easily; one couldn’t even apply without two current members willing to vouch for them as sponsors. When a new application was received by a bourse, it was posted along with the applicant’s photograph on a cork bulletin board on the main trading floor of every bourse in the world. The members browsed these boards not out of curiosity, but for security. They looked to see if they recognized anyone who might have screwed them in the past. If they did, they detailed their unsavory experience in a memo to the bourse membership committee. The allegation was investigated, and if substantiated, the application was denied. A record of the denial was entered into a database accessible to all bourses, along with the reason.
If an applicant survived two months on the bulletin board without any complaints, he was granted a provisional membership, which was susceptible to revocation. Even after he passed the trial period, he had to continue to operate aboveboard; if he was ever caught so much as failing to pay his taxes, he could get kicked out of the bourse. And if a diamantaire was canned at one bourse, he would never get into another. It was a system that encouraged honest dealings; the trust displayed on the trading floors was well earned.
This is of course pure social capital back to the idea that by spreading people’s negative reputations you counteract any possible gain to be had from cheating on transaction 1, by imposing foregone gains from being able to trade with anyone else.
One weak link of the bourse “social capital” system is that it presumes that people kept their current appearances. Either through disguises, or plastic surgery one could easily imagine someone changing his or her physical appearance enough that their negative reputation could be wiped clean. The cost of plastic surgery is high enough that it wouldn’t make financial sense in a low stakes business endeavor, but could very easily be worth it in the millions of dollars trading hands in many bourse deals.
Flawless‘ tale of Leonardo Notarbartolo (the master thief) and his School of Turin compatriots is extremely interesting; Notarbartolo engenders false sense of trust among the woman renting him the space in Antwerp’s Diamond Building, leading her not to check his past before admitting the fox to the hen-house. And her trust of Notarbartolo causes her to share the building blueprints with him when he claims he is interested in potentially remodeling his office. Their heist is undone only by the nervousness of one of the robbers who heedlessly and nervously discards trash near Brussels as they are speeding away, on the grounds of some woods, vigilantly and daily policed by a neighbor to protest desecration to this property. The man finds small diamonds, currency, security videotapes and calls the police.
For an abridged account of the heist, see the WIRED account here.
For a scholarly account of the importance of trust in the diamond industry, read BD Richman’s “How Community Institutions Create Economic Advantage: Jewish Diamond Merchants in New York (2006).”