The Somali Pirates' Business Model | Hacker News Reader

The Somali Pirates' Business Model

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19 pointsrobg16 comments

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

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.

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.

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.

Reminds of a story from Greg Mankiw's blog on Machiavellian Entrepreneurs:

http://gregmankiw.blogspot.com/2008/07/machiavellian-entrepr...

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.

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.

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.

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.

> 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?

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.

It is interesting that the dumping angle is not much discussed in the mainstream media. I was aware of it, I just didn't know it is that bad. I guess nobody looks at it from their point of view. Also, the pirates don't really have a handy PR agency to promote their point.

At the same time, I wonder if they use the 'dumping' as an excuse to pirate. Pirating is dangerous but it is also quite profitable. They take over un-armed ships, hold them for a couple of months, then millions of dollars land in their lap. It is certainly more profitable than fishing or growing things.

heh. janqui logic. i guess you have never lived in a poor country.

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.

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".

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.

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