“The Piracy Business Model” describes a system that guarantees every participating pirate a defined share of the ransom money. It is sophisticated enough that it includes “A” shares and “B” shares similar to preferred and common shares in legitimate publicly traded companies around the globe. Just like with preferred stock, there is a premium for entering the game. Piracy “A” shares are earned by bringing weapons and being the first pirate to board a ship during attack. The lower-level militiamen that fill the roster each earn a “B” share. Once a ship is hijacked and brought to port, it’s time to balance the books by paying suppliers, investors, local elders for anchoring rights, and “B” shareholders. The remaining funds are split among the “A” shares and distributed accordingly to the “A” shareholders.
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I have to tell you that I find this evolution of piracy or ‘privateering’ in Somalia to be fascinating. What is interesting to watch is that the Somalis are applying modern day business practices and finance to the concept. If you would like to study a similar model, just check out early America with our privateers during the Revolutionary War and War of 1812.
So let’s go over a couple of the points in these two articles I posted, that caught my eye. The first is Fourth Generation Somali Piracy. The idea being, is that pirates would hijack ships, use key valuable personnel as human shields, and then convert that boat into a operations platform or ‘mother ship’. Makes sense, and I could see them doing that.
The idea being is that sailing that hijacked ship all the way back to their failed state’s harbor is time consuming and inefficient. You could stay out at sea, live more comfortably on a newer hijacked vessel, and continue to expand your piracy operations in places where navies are not operating at. I will keep my eyes open for any proof of this happening.
These pirates are smart, and they will find a way to get to waters in which the EU, NATO and the US is unable to reach. They will also go after weak and unsuspecting vessels, which means going to places where piracy really isn’t a big thing of that region.
Armed security details on boats will really be the only counter to this, because today’s navies are just not able to cover the kind of territory we are talking about. Plus the cost for today’s naval activities is astronomical. Billions of dollars are being spent every year to go after pirates in small boats armed with AK’s. The pirates are the small and many–western navies are the few and large. ( a reference to the ‘new rules of war‘)
The other article is just a touch up on the politics of piracy. Now that these guys are making the fat cash, they are able to sling dollars to politicians so that they can protect their business. Pretty standard for organized crime or any venture that wants to expand their horizons and add stability to their operation. And with the stock market approach, politicians and jihadists can all invest in these pirate ventures. The quote up top indicates that their little stock market concept is evolving and dare I say, the pirates are applying Kaizen to their set up? lol
Now to finish up on my solution to this thing. We are now in a prime opportunity to once again apply the concepts of yesteryear to today’s piracy. We should be encouraging the shipping industry to outfit their boats with competent security teams, complete with sufficient firepower to deal with all potential threats. We should also have a legal system in place that can effectively deal with and integrate with this private security apparatus. And with the advent of pirates being captured, having an effective international courts system that these thugs worry about and fear, would be highly advantageous. And of course, the world’s navies should continue to hunt and destroy/capture these folks, and work with the security teams of boats, in order to effectively deal with this scourge.
I would mention using the Letter of Marque as another tool to combat piracy, but I doubt today’s modern navies would appreciate that kind of thing. Maybe when countries are financially drained from their anti-piracy ventures, will they consider such tools. Until then, anti-piracy will give these large lumbering navies something to do. They have to justify their budgets and existence somehow, right? lol But my point with the LoM, is that creating a free market kill/capture mechanism to go after these guys, is one of the only ways to really keep up with this ever evolving piracy business model, and especially in the commons of the open sea. –Matt
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Somali Piracy Tactics Evolve; Threats Could Expand Globally
April 2010
By Michael G. Frodl
Underwriters and shippers are as concerned about what the United States and other powers won’t do against Somali pirates, as they are about what the pirates will do against ships they insure, own and operate.
While the Gulf of Aden is a relatively safe passage for the deployment of warships through a narrow corridor in a vast gulf, some Somali pirates have retaken the initiative in the waters of the Indian Ocean off East Africa.
Continuing to treat Somali pirates as a homogenous, if not a monolithic threat, is not working.
The current approach is showing diminishing returns on investments in anti-piracy. The deployment of modern warships costs easily more than a billion dollars a year, if not more, to sustain. Risks to shipping and the costs of underwriting continue to rise in the ocean where 60 percent of global commerce transits.
Meanwhile, the return on investment in piracy, which basically involves arming and supplying a handful of men and sending them out on a mother ship and two skiffs, only continues to rise.