4 ms·

The Somali Pirates' Business Model

19 points by robg 17y ago

IgorPartola 17y ago
Anybody here read Heinlein's "Citizen of the Galaxy"? To stop think kind of a business, you make it unprofitable. The question is "how?"
- ankeshk 17y ago
  Thats actually a very good question. I can think of a few ways to make pirating unprofitable. Or dangerous. But unfortunately can't think of any non-violent way. * Equip all the ships with armament. The pirate teams are small in size. So hopefully, the investment in arms wouldn't be a lot to fight them off. * Turn the table. Offer an insane "Reward" to anyone who captures one of the local elders - the people who give anchoring permission.
  - hkuo 17y ago
    Not sure either of those would work. I don't think companies would want to spend money for weapons, nor the cost of training employees to use them, nor the liability of what happens if they are used and any ensuing results. They want the police or government to simply take care of it, and they spend no money at all. Unless that happens, it's probably less cost to simply accept piracy as a cost of busienss. For the reward to capture or off a local elder, that just opens up a spot for another person to fill in.
    - ankeshk 17y ago
      Thanks for your comment. For the reward to capture or off a local elder, that just opens up a spot for another person to fill in. If you put up rewards on local elders if they provide anchoring permission, there is no incentive for local elders to provide the permission anymore. If the local elder still provides permission and he is successfully captured for a big reward, then he may be replaced. But I doubt the new elder will provide permission to anyone else again.
      - hundredwatt 17y ago
        Reminds of a story from Greg Mankiw's blog on Machiavellian Entrepreneurs: http://gregmankiw.blogspot.com/2008/07/machiavellian-entrepreneurs.html http://gregmankiw.blogspot.com/2008/07/machiavellian-entrepr...
    - sstrudeau 17y ago
      A friend's brother pilots a freighters. They always have a couple of armed Gurkha's (Nepalese mercenaries) on board. So some companies are willing to pay for armed security for their ships; but a few armed ships is clearly an insufficient deterrent to the entire enterprise of piracy.
      - khafra 17y ago
        It depends on who has a larger profit margin, the shipping companies or the pirates. If a random 5% of freighters are armed heavily enough to destroy or capture a pirate vessel, the pirates have to be making enough profit for a total loss in 1 of 20 raids to be worth it.
  - philk 17y ago
    I don't think you'll get anyone to take you up on the local elder thing. If someone turns in the local elder and gets a whole lot of cash their life expectancy won't be very good. Cash is only good if you're alive to spend it. Look at it this way, we've had insane rewards out on Osama Bin Laden for a while and have precisely dick as a result. On a side note, you also need really good intel on the ground to make sure that the guy you're paying money for really is a local elder and not some poor sucker who's being handed over for the money. Getting good intel in Somalia is a non-trivial problem.
- philk 17y ago
  You make it unprofitable by tracking and killing as many of the pirates as possible. It raises their costs substantially. I can think of a couple of possible solutions: a) Dummy ships. Get a warship of some sort, make it look tempting and fill it with armaments. b) Cheap UAVs to help spot the pirates. (You don't necessarily need to scan the entire area, just scan ports and then follow the ships that leave). There are other things you can do, like banning negotiation with the pirates and penalising anyone who pays a ransom but that's probably not palatable to politicians.
  - rdtsc 17y ago
    > like banning negotiation with the pirates and penalising anyone who pays a ransom. I wouldn't want to be in a captured ship when this law goes into effect. I wonder though if some of these shipping companies can hire private security firms to protect them? I would guess that commercial vessels cannot have military on them in order to have access to other countries' ports, but the private security can just disembark before going to national waters. So here is a business proposal then. Lease a large enough vessel. Hire a bunch of guys with guns. Latest and greatest millitary equipment. Add some deterence devices ( high powered water jets, stink bombs, directed microwave radiation, regular firearms). Then escort and embark on commercial vessels when they are in international waters. Charge by the hour and world region. Provide security. Before the commercial vessel sails into its destination port, disembark and wait in international waters to escort the next vessel out to another destination. Would that work?
    - Aetius 17y ago
      Somolian Pirates will continue piracy until they are wealthy enough to lift the country out of poverty. Their waters are no good thanks to multinational dumping and overfishing, their land isn't arable, and their infrastructure is nil. So, this really is the only option. It is either death at Sea or a very precarious existence at home. They have every incentive to keep taxing the waters until there is an equilibrium of military cost to deploy enough ships and men to stop them vs. piracy ransom costs. It will be a long time (it costs many millions of dollars to deploy standing warships) before this equilibrium is reached.
- khafra 17y ago
  Everybody so far wants to increase the risk of loss for the pirates. But there's far more to running a profitable enterprise than risk of loss; that's just the factor that "feels right," morally, when dealing with pirates. Here's a different strategy, just off the top of my head: The large shipping companies that keep getting raided could put economic and legal pressure on fishing corporations from other countries that use Somali waters, and garbage companies that dump waste in their waters. This could easily increase the returns from fishing for Somalis with boats to the point where engaging in piracy was a net loss.
  - IgorPartola 17y ago
    In this sense, I revise my original comment to "less profitable than alternatives" rather than "unprofitable". While I think there are other things to take into account with your proposed solution, it feels like a better long term solution than "let's try to scare these already desperate people into not attacking ships".
- qeorge 17y ago
  It sounds corny, but the best solution is improving the quality of life in Somalia. Specifically, rebuilding their economy. The "cost" of piracy is already tremendously high by any standard. Its only an attractive option when its the only option. Look at Rwanda, or the ghettos of America, for parallels.

19 points by robg 17y ago

Anybody here read Heinlein's "Citizen of the Galaxy"? To stop think kind of a business, you make it unprofitable. The question is "how?"

ankeshk 17y ago
Thats actually a very good question. I can think of a few ways to make pirating unprofitable. Or dangerous. But unfortunately can't think of any non-violent way. * Equip all the ships with armament. The pirate teams are small in size. So hopefully, the investment in arms wouldn't be a lot to fight them off. * Turn the table. Offer an insane "Reward" to anyone who captures one of the local elders - the people who give anchoring permission.
- hkuo 17y ago
  Not sure either of those would work. I don't think companies would want to spend money for weapons, nor the cost of training employees to use them, nor the liability of what happens if they are used and any ensuing results. They want the police or government to simply take care of it, and they spend no money at all. Unless that happens, it's probably less cost to simply accept piracy as a cost of busienss. For the reward to capture or off a local elder, that just opens up a spot for another person to fill in.
  - ankeshk 17y ago
    Thanks for your comment. For the reward to capture or off a local elder, that just opens up a spot for another person to fill in. If you put up rewards on local elders if they provide anchoring permission, there is no incentive for local elders to provide the permission anymore. If the local elder still provides permission and he is successfully captured for a big reward, then he may be replaced. But I doubt the new elder will provide permission to anyone else again.
    - hundredwatt 17y ago
      Reminds of a story from Greg Mankiw's blog on Machiavellian Entrepreneurs: http://gregmankiw.blogspot.com/2008/07/machiavellian-entrepreneurs.html http://gregmankiw.blogspot.com/2008/07/machiavellian-entrepr...
  - sstrudeau 17y ago
    A friend's brother pilots a freighters. They always have a couple of armed Gurkha's (Nepalese mercenaries) on board. So some companies are willing to pay for armed security for their ships; but a few armed ships is clearly an insufficient deterrent to the entire enterprise of piracy.
    - khafra 17y ago
      It depends on who has a larger profit margin, the shipping companies or the pirates. If a random 5% of freighters are armed heavily enough to destroy or capture a pirate vessel, the pirates have to be making enough profit for a total loss in 1 of 20 raids to be worth it.
- philk 17y ago
  I don't think you'll get anyone to take you up on the local elder thing. If someone turns in the local elder and gets a whole lot of cash their life expectancy won't be very good. Cash is only good if you're alive to spend it. Look at it this way, we've had insane rewards out on Osama Bin Laden for a while and have precisely dick as a result. On a side note, you also need really good intel on the ground to make sure that the guy you're paying money for really is a local elder and not some poor sucker who's being handed over for the money. Getting good intel in Somalia is a non-trivial problem.
philk 17y ago
You make it unprofitable by tracking and killing as many of the pirates as possible. It raises their costs substantially. I can think of a couple of possible solutions: a) Dummy ships. Get a warship of some sort, make it look tempting and fill it with armaments. b) Cheap UAVs to help spot the pirates. (You don't necessarily need to scan the entire area, just scan ports and then follow the ships that leave). There are other things you can do, like banning negotiation with the pirates and penalising anyone who pays a ransom but that's probably not palatable to politicians.
- rdtsc 17y ago
  > like banning negotiation with the pirates and penalising anyone who pays a ransom. I wouldn't want to be in a captured ship when this law goes into effect. I wonder though if some of these shipping companies can hire private security firms to protect them? I would guess that commercial vessels cannot have military on them in order to have access to other countries' ports, but the private security can just disembark before going to national waters. So here is a business proposal then. Lease a large enough vessel. Hire a bunch of guys with guns. Latest and greatest millitary equipment. Add some deterence devices ( high powered water jets, stink bombs, directed microwave radiation, regular firearms). Then escort and embark on commercial vessels when they are in international waters. Charge by the hour and world region. Provide security. Before the commercial vessel sails into its destination port, disembark and wait in international waters to escort the next vessel out to another destination. Would that work?
  - Aetius 17y ago
    Somolian Pirates will continue piracy until they are wealthy enough to lift the country out of poverty. Their waters are no good thanks to multinational dumping and overfishing, their land isn't arable, and their infrastructure is nil. So, this really is the only option. It is either death at Sea or a very precarious existence at home. They have every incentive to keep taxing the waters until there is an equilibrium of military cost to deploy enough ships and men to stop them vs. piracy ransom costs. It will be a long time (it costs many millions of dollars to deploy standing warships) before this equilibrium is reached.
khafra 17y ago
Everybody so far wants to increase the risk of loss for the pirates. But there's far more to running a profitable enterprise than risk of loss; that's just the factor that "feels right," morally, when dealing with pirates. Here's a different strategy, just off the top of my head: The large shipping companies that keep getting raided could put economic and legal pressure on fishing corporations from other countries that use Somali waters, and garbage companies that dump waste in their waters. This could easily increase the returns from fishing for Somalis with boats to the point where engaging in piracy was a net loss.
- IgorPartola 17y ago
  In this sense, I revise my original comment to "less profitable than alternatives" rather than "unprofitable". While I think there are other things to take into account with your proposed solution, it feels like a better long term solution than "let's try to scare these already desperate people into not attacking ships".
qeorge 17y ago
It sounds corny, but the best solution is improving the quality of life in Somalia. Specifically, rebuilding their economy. The "cost" of piracy is already tremendously high by any standard. Its only an attractive option when its the only option. Look at Rwanda, or the ghettos of America, for parallels.