Community Pirating

After jump-starting the economies of Somali fishing towns, local pirates are taking their local business further by setting up “stock exchanges” that host 72 pirate gangs or “maritime companies,” a Reuters article reports. Shares are open to any local who can take part by providing money or weapons. Says one former pirate: “We’ve made piracy a community activity.” [%comments]

Garrett Pendergast

If you pay money to pirates you get more pirates

Imad Qureshi

I actually read this Reuters article yesterday and found it fascinating. Its just amazing to see how markets can develop. If you read the article then you'll find out that one woman who invested a rocket propelled grenade got $75000 in dividends (some might call it ransom money). Got to love markets....


Makes sense... Somalia's GDP in 2008 $2.4BB; estimated pirate activity proceeds in 2008 $80MM. Piracy represents about 3.3% of GDP, and makes it a visible component of the economy.


The investors better hope it's not an MLM. Very easy to take in money and pay out "profits" for a while in order get more "investors".

Should people show up one day and find the market gone, there is really no recourse.

In this context of crime, it would just be another enterprising entrepreneur. :-)


The question is, when can we get some ETFs to bring these new foreign markets onto the US exchanges? hmm?

I want a piece.

Mark S.

There was a news feature on NPR where this Danish ship owner talked about his experience with the pirate's negotiating intermediary. He said it was just like any other kind of business transaction including the follow up social call after the conclusion of business.

So when is the Somali piracy federation going to start up their own business school and issue MBAs and who are they going to hire as professors. They could do it as correspondence courses via satellite internet connections.


It takes a village...aaarrrggghhhh!

Joe Smith

"Millions for defense, not a penny for tribute."

It was the right policy then, it is the right policy now.

The international community has been playing catch and release with the pirates. They need to start shooting pirates on sight.

Imad Qureshi

I think piracy is very similar to most problems we face. If we unite we can easily defeat it. But for each country it probably isn't worth fighting especially when there will be a lot of free riders. If I am country X and my ship has never been attacked then I have little to zero incentive of eliminating them. For country Y if only one or two ships have been attacked, then still its not worth getting into such a war. If every country follows US strategy of not paying ransom and taking them out then they'll realize at one point that its not working and will quit at some point (later than sooner). Problem is, not every country has resources and policies like US. I think this problem is not going anywhere soon.


Gives new meaning to the term community organizer

Ian Kemmish

“We've made piracy a community activity.”

No, they haven't. Queen Elizabeth I did that.

Richard Henderson

So what is the more cost effective method for fighting the piracy:
1) Spend on defense, anti-piracy practices, anti-piracy marketing, etc.
2) Create an economic incentive to overshadow the current incentives. A contra-market.

Mark S.

A historical perspective:
Piracy off the coast of Somalia started to take off when the central govt. of Somalia imploded and international fishing fleets could steal all the fish in the Somali economic interest zone w/o any restrictions. Now that the pirates are making so much money, its unlikely they will go back to fishing. Capturing an oil tanker and collecting $5 million ransom is far more profitable than working the sea every day of the year for a couple of boatloads of fish.

louie one eye

don't we just love labels?


Here's an interesting book for economists:

Garitee, Jerome R.,
The Republic's private navy - The American privateering business as practiced by Baltimore during the War of 1812,
Middletown, Conn. : Published for Mystic Seaport by Wesleyan University Press, 1977.
356 p. (250 p. text, 82 p. appendices, 43 p.
notes, 15 p. index, 10 p. recommended biblio).

Jerome Garitee takes an interesting period in American history and looks at it from a different perspective. It is not a story of swashbucling sea battles in a war that has been romanticized by patriotic revisionists. Instead he treats it as a business history of Baltimore, a hub of the privateering business.

It starts out with a lot of pirate history starting from the Medieval Age.


The Barbary pirates were successful because the British paid them off not to harrass their ships. They had the biggest navy in the world and could have handled them easily but it was a profitable way for Britain to engage in Mediterranean trade because their competitors were attacked. As soon as the British decided it wasn't in their interest anymore piracy died out in N. Africa, no matter what US Navy and Marine history says.



A few people have commented on how these people are very innovative and joked about education (Mark S.).

I think on a closer inspection we may actually find that a few of the heads of the markets are actually educated in market functions and business from foreign universities. Once a student visa is expired, and they are deported (what country is really looking to keep business graduates, it is a totally saturated job market) to a country with such a low about of sophisticated business, why would a person trained in entrepreneurship and business not take the opportunity. As previously mentioned, piracy is about 3% of the GDP, that's a pretty significant market for skills.

I know of a few other situations where higher education has been used to make crime more efficient and profitable (the most famous being cited in the Freakonomics book), it only makes sense that it's a contributing factor here.