An Economic Analysis of the Somali Pirate Business Model

[woodyear99]

Welcome to the wonderful world of Somali Pirates.......bonus game at the end of the article lol

http://www.wired.com/politics/security/magazine/17-07/ff_somali_pirates

The rough fishermen of the so-called Somali coast guard are unrepentant criminals, yes, but they're more than that. They're innovators. Where earlier sea bandits were satisfied to make off with a dinghy full of booty, pirates who prowl northeast Africa's Gulf of Aden hold captured ships for ransom. This strategy has been fabulously successful: The typical payoff today is 100 times what it was in 2005, and the number of attacks has skyrocketed.

Like any business, Somali piracy can be explained in purely economic terms. It flourishes by exploiting the incentives that drive international maritime trade. The other parties involved — shippers, insurers, private security contractors, and numerous national navies — stand to gain more (or at least lose less) by tolerating it than by putting up a serious fight. As for the pirates, their escalating demands are a method of price discovery, a way of gauging how much the market will bear.

The risk-and-reward calculations for the various players arise at key points of tension: at the outset of a shipment, when a vessel comes under attack, during ransom negotiations, and when a deal is struck. As long as national navies don't roll in with guns blazing, the region's peculiar economics ensure that most everyone gets a cut.

All of which makes daring rescues, like the liberation in April of the Maersk Alabama's captain, the exception rather than the rule. Such derring-do may become more frequent as public pressure builds to deep-six the brigands. However, the story of the Stolt Valor, captured on September 15, 2008, is more typical. Here's how it played out, along with the cold, hard numbers that have put the Somali pirate business model at the center of a growth industry.

[Q]

No sh!t, Sherlock. That's like saying a drug lord makes more than a pharmacist, lol.

Nice find nonetheless. Good stuff.  

[woodyear99]

Imagine if software pirates were just as hardcore lol


Q&A With a Pirate

How much does it cost to outfit a mission?
An operation with 12 armed men costs a little over $30,000. But you need to execute three or four missions to get lucky once.

How do you choose a target?
Before we board, we check the cargo, owner, and port of origin via contacts abroad or the Internet. That way we can price our demand accordingly.

How do you decide what to demand?
Ships with African or Indian crews are never profitable. We usually release them immediately. If the crew is Western, we've hit the jackpot.

What are the keys to a successful attack?
We have backup boats, surveillance, and walkie-talkies. But the key is that we are willing to die. Most of the crews are not.

[Q]

...

What are the keys to a successful attack?
We have backup boats, surveillance, and walkie-talkies. But the key is that we are willing to die. Most of the crews are not.

QFMFT