AGS CEO Ruth Batson Appointed CEO of AGS Labs

[Karl_K]

http://www.idexonline.com/portal_FullNews.asp?id=37592

To be honest I am not sure I like the lab and the society being under the same person.
I raises the appearance of a conflict of interest.

Right off the bat:
“It is my goal to make sure that the combined forces of both the AGS and AGS Labs work more closely together to better service customers of the Lab and the members of the AGS.”
The customers are not consumers they are trade members.

 

[denverappraiser]

The vast majority of the lab business comes from clients who are not AGS members. I think that’s what she means. You’re correct that consumers are not their customers but they are the users of the end work product and both the lab and the society are extremely aware of their position to protect the public trust. In that sense it’s not so different from GIA’s lab (AGS and GIA share the same founder so it’s not so surprising).

Ruth rocks. She’ll do great.

Karl, I’m curious. The lab has been at least 51% owned by AGS since they opened the doors. This year they bought out their partners to raise that stake to 100% but they have been in total control since the beginning. You seem to be concerned that their goal of protecting the public interest may have eroded by this. Why?

 

[Karl_K]

Karl, I’m curious. The lab has been at least 51% owned by AGS since they opened the doors. This year they bought out their partners to raise that stake to 100% but they have been in total control since the beginning. You seem to be concerned that their goal of protecting the public interest may have eroded by this. Why?

Mainly concerned about politics between the two.
AGSL has been very innovative and I am more worried about this affecting that rather than any color/clarity grading issues.
I remember some of the issues with some AGS members when they launched the new cut grades.
More bad ideas like the AGSL Gold reports are also more likely the closer they are linked.

 

[denverappraiser]

Karl, I’m curious. The lab has been at least 51% owned by AGS since they opened the doors. This year they bought out their partners to raise that stake to 100% but they have been in total control since the beginning. You seem to be concerned that their goal of protecting the public interest may have eroded by this. Why?

Mainly concerned about politics between the two.
AGSL has been very innovative and I am more worried about this affecting that rather than any color/clarity grading issues.
I remember some of the issues with some AGS members when they launched the new cut grades.
More bad ideas like the AGSL Gold reports are also more likely the closer they are linked.

I suppose I agree that that was a bad idea but I"m pretty sure it came from commercial pressures on AGSL more than from the AGS membership. Innovation is not always commercially worthwhile. The cut grading of ovals, for example was, at least businesswise, a total bust even though from a technical standpoint they are absolutely correct. That came from the tech guys saying 'look what we can do!' without the filter of the business people asking 'yeah but will it sell?' One of the things about having good ideas is you have to be prepared to have some bad ideas too. That's how progress happens.

 

[oldminer]

The history of the creation of the AGS Lab is not well known by most participants on Pricescope. AGS had its own proprietary system of diamond cut grading for many years before the lab was considered or opened. This was a system of cut grading round diamonds in a way favoring the Tolkowsky model which an AGS Member, Robert Limon, had created for the membership's exclusive use. Some AGS firms used the system and others ignored it. AGS membership was not large enough to really support a full fledged lab, so when it was opened every member of the trade was encouraged to give the lab work. To me, this was against the principle of supporting the AGS membership and its exclusivity and watered down the meaning of even being an AGS member. With the advent of the Lab, any diamond seller could offer an AGS blessed diamond equally as well as dues paying AGS members could. But that is rather ancient history although it isn't so many years ago.

By offering to grade the cut of a diamond, the AGS Lab bit off only a rather small portion of the total diamond grading business. AGS did not want to go head to head with the GIA lab and this was a way of limiting the confrontation to a narrow segment of diamond sales and dealers. I always figured that if the AGSL was a success, it would be bought up by GIA. So far, that has not happened, but now GIA does effectively the same thing with Triple X grading of cut in a more liberal way, which has larger appeal to dealers.

This current situation limits the possible growth of the AGSL and what is going to be done? I suppose the control of the lab under the same management as the AGS is one step to see what can be done to grow both AGS Membership and AGSL grading activity. Certainly makes sense to me. My own feeling is that the AGS Lab ought to have benefited those firms which qualified to be AGS Members. AGS was an elite fraternity of fine jewelers and their suppliers who paid substantial annual dues and ought to have been entitled to the benefits of a truly boutique lab operation. Instead, the lab was available to every dealer and seller, adding to competition which was detrimental, in some respects, to dues paying AGS Members. This was likely an unintended consequence, but watching this all play out over the past 15 or so years has been of interest to me. SInce my firm had been an active and supporting supplier member of AGS for over 20 years before the lab was opened, I felt it was in direct competition to a part of what my firm offered AGS members. We resigned in 1997 when the AGS lab began operations with much regret, and with hope that the AGS had not been too hasty in taking the decision to let any firm send in diamonds for grading.

I still wish AGS and AGSL much luck and success. Peter Yantzer, the lab chief at AGS, has remained a good friend and I have shared what I could with the lab in information and encouragement. Maybe the new Chief will have some really good ideas and do a fine job. Why not? My own feeling is that the AGSL ought to be a totally independent entity, free to compete and to be competed against, and not tethered to any membership organization.

 

[denverappraiser]

Ruth certainly has a challenging job to do here and I agree that defining the objectives of the lab is a key issue. Is it to make money? That’s certainly part of it. Money is what pays for everything else after all. Is it to provide a value-added benefit for the membership? Possibly. There ARE lab services available only to AGS member firms (and a limited group of them for that matter) although, as far as I can tell, the members don’t seem to be all that interested in the ‘boutique’ sorts of services. Protect the public interest? That’s pretty much the prime directive but I’m not sure it’s the purpose of running the lab. It’s sort of like saying that doctors should ‘do no harm’. It’s an important directive and it’s certainly in their minds as they work but it’s not really their purpose. GIA is already doing that pretty well and, to the extent that AGS is adding to this it’s distinctly on the margins. Competition is good and good competition keeps everyone honest but I’m not really convinced that a consumer is better ‘protected’ by AGSL services than the various offerings from GIA. To promote the cause of quality diamond cutting? Maybe. They certainly DO a lot of that but they’re a lab, not a cutting house. The only think they can do is offer some guidance. In the end, shoppers will buy whatever they want and cutters will cut whatever they want. The lab gets no vote on either point, nor should they. There are surely more and this sort of thing is what the CEO is for. Ruth is a well-qualified, hard-working and smart lady who has been involved but not actually working in the lab since the beginning. That strikes me as a fine place to draw from for a new boss. She knows the inside scoop but she doesn't really have a pony in the race beyond representing the owners.

Is there a conflict of interest between the society, the lab, the lab clients, and the general public? That’s an interesting question and I suppose to some extent there is but none of this changed with appointing a new CEO or even with AGS buying out their partners. They are and always have been in total control. Frankly I think they seem to handle this pretty well but it does deserve monitoring and there definitely are potential risks.

Would the lab, the clients or the public be better off if they were ‘independent’? That is to say, if AGS didn’t hold controlling interest? Actually I sort of doubt it. It's not unprecedented. There are quite a few independent labs out there including both for-profit and non-profit examples. Some are definitely better than others and some are clearly more successful than others but I don’t see the ownership status as all that important a difference. I may be wrong and I’d love to hear the case. What would be improved if AGS had sold to the partners rather than the reverse?