How Somalia’s Pirates Make Money

How Somalia’s Pirates Make Money


This video is sponsored by Skillshare. The first 500 people to use the link in the
description get their first two months free. This is the TI Europe, one of the four largest
ships in the world. And here’s a banana for scale. At 380 meters long, or twelve hundred feet,
it’s 41% longer than the Titanic, but still shorter than Titanic. In this business, efficiency is everything
and every dollar counts. A ship made with twice the steel has much
more than twice the capacity, with roughly the same size crew. Bigger boats, therefore, cost only a little
bit more and yet make a lot more money. So, here we are, with supertankers that can
hold three million barrels of oil. Which, at today’s going price, makes the
TI Europe a $174 million target for pirates. Last year, an attack was reported every other
day, in some of the busiest, most well-patrolled routes, like the Gulf of Aden, the Singapore
Straight, and the coast of Malaysia. But these are not parrot-wearing, sword-carrying
outlaws. Today’s pirates operate a carefully-planned,
well-executed business – with investors, a stock market, chain of command, and experienced
negotiators. All without the help of LinkedIn. Every part of an attack is a fascinating lesson
in economics. And with profit margins of over 30%, even
Apple should be jealous. Somalia is, by almost every metric, one of
the hardest places to live on Earth. Its now three-decade long civil war has not
only led to drought and famine, but also left the country without a unified, central government. To the north are the independent but unrecognized
states of Somaliland and Puntland. In the south, control is split between the
federal government based in the capital, Mogadishu, and large, terrorist factions. This makes building infrastructure like schools
and hospitals extremely difficult. Which, in turn, makes building a formal economy,
nearly impossible. The result is a 55-year life expectancy, one
of the lowest in the world, and a GDP that makes Ghana and Madagascar look rich. While next-door Ethiopia makes money growing
coffee, potatoes, and cereals, Somalia is not so lucky. Only 1.8% of its land is arable, compared
to half of India, or 34% of Germany. Its two climates are hot and really hot. But, it does have one thing going for it:
the longest coastline of any country in Africa. Fishing should be a huge source of income. But, you guessed it, there’s a catch. Foreign companies noticed the country seemed
a little… preoccupied at the moment and probably wouldn’t notice if they dumped
toxic waste in its waters, killing thousands of fish in the process. Those that survived are now caught illegally
by foreign fishermen, who steal $300 million worth every year, leaving Somalia with only
a small share of its own tuna. So, just to recap: Somalis are given little
education, face a constant threat of violence, have nearly zero healthcare, and a per capita
GDP of… keep scrolling… $104, or twenty-eight cents, per person, per
day. The average ransom, on the other hand, is
2.7 million, so piracy is not exactly a tough sell. It all begins by identifying a target. The ideal victim comes from a rich country,
is traveling slowly, and near the coast. Or, in the case of luxury cruise ship Star
Breeze which was attacked in 2005, all three. The next step is financing. A single attack may cost $30,000 up-front,
which is already a lot, but especially in Somalia. So the risk is usually spread between 3-5
investors who buy shares in an informal stock market. Now comes the attack. With one, large mother ship, anywhere between
4 and 20 pirates follow their target up to 800 miles off the coast. Once they get close, they switch to one or
two small chaser boats, and use rope and ladders to board the ship. Of course, the crew is trying to speed up,
or change directions, and fight back, but they also know they’re no match for the
AK-47s, rocket launchers, and desperation of the pirates. The crew is gathered together, and their communications
destroyed, making the ship go dark. The next step depends on their business model. In areas like South East Asia, the goal is
often stealing oil, selling it to anyone smart enough not to ask why it’s so cheap. But here, in Somalia, pirates rarely touch
the cargo. The crew is, by far, the most valuable thing
on board. They steer the ship to a nearby port, where
the most tense part of the operation begins. With only one buyer and one seller, almost
none of the rules of a normal negotiation apply. Neither party has all the information and
both have great incentive to lie. The owner of the ship wants to appear poor,
driving down the ransom. The pirates, meanwhile, need to seem rash
enough to deliver on their threats and yet patient enough to wait for a deal. Because, the clock is ticking. As time goes on, the value of the ship and
its cargo goes down, and the average ransom generally goes up. Talks, therefore, can last three, four, five
hundred days, all spoken through a translator, often with several different negotiators. If the owner has Kidnapping & Ransom Insurance,
negotiations are made by a professional, who reduces the chance of death from 9% to just
two. But companies aren’t allowed to say they
have insurance. In fact, many corporate travelers don’t
know they have K&R insurance. If they did, it would be invalidated. Because of the incentives, an agreement is
almost always reached. Pirates bring the crew up to the top deck,
confirming their safety. And then, a helicopter flies overhead and
drops a waterproof container full of cash. Finally, comes a pirate’s favorite job:
accounting. First, investors get their guaranteed cut
of at least 30%, The port, who looked the other way while they
parked the ship, gets 5-10%. And the rest is split between the attackers,
with a bonus of around $10,000 for being first to board the ship. This scenario plays out hundreds of times
a year, and costs shipping companies a total of 4.9 to $8.3 billion a year – including
security and insurance. Even just speeding up from 13 to 18 knots
costs an extra $88,000 in fuel, per ship, per day. And those costs are passed on to you and me. We all pay a hidden “piracy tax”. So, what can be done? The obvious answer is fighting back. NATO’s Operation Ocean Shield greatly reduced
attacks from 2009 to 16 by patrolling dangerous waters. And any shippers now hire private security
companies to fill that role. But this creates a free rider problem, other
companies and countries benefit from that security without paying for it themselves. Likewise, everyone would be better off if
no one paid ransoms, but it’s always in each company’s best interest to pay them. All of these solutions reduce piracy, but
none of them solve it. For 30 – $75,000 per attack, there will always
be someone willing to take that risk, no matter how high it becomes. The only real solution is economic, giving
pirates alternative ways to make money. Rebuilding a country like Somalia is a major
undertaking, but giving locals new skills and new opportunities really is the long-term
solution. And, that reminds me of a certain sponsor
of today’s video, you guessed it, Skillshare! What a coincidence! My new favorite Skillshare class is YouTuber
Thomas Frank’s tips on how to be more productive. He does a really good job of going into detail
and focusing on how you can apply different apps and techniques to the specific way you
work or study. If, like me, you’re interested in business
and economics, you should take a class like “How the Stock Market Works”, by YouTuber
Business Casual. It’s no secret that YouTube comments kinda
get lost in the void. But with Skillshare, you can directly ask
questions and get help from the instructor. So, whatever you’re interested in – art,
photography, app development, animation, hey, that’s my class, go try Skillshare for free
for two whole months by using the link in the description.

100 thoughts on “How Somalia’s Pirates Make Money

  1. The country is what it is for decades and will continue for decades to come
    That’s the simple reality of it

  2. You guys when your fucking ships fishing our ocean is legal and when we ask you some shit money is illegal 😏 mother fuckers

  3. pirates do they stell vedio games? And iphones and other goods and do they go ather kids next door and peter pain?

  4. I’m in Somalia Stop lieing mate when You never been to Somalia all you know about is from CNN fake news like yours mate, itz really the westerners to blame of helping the terrorist to kill Innocent people til this day… God is watching

  5. This comment will probably be buried but idk

    Here a maritime officer

    The part about the money is not true
    The way a pirate attack goes is. Some strange guy is going to one of the poor fisher villages and promise them if they come with him he will make their village rich.

    At first when ships got attacked there was no fear because the attackers asked for a couple of million dollars and the company would pay it, because for them it isnt much.

    After some research were the money went countries around the world took action, because what happend was that the poor village got around 10.000 dollars from the bounties and the rest went to terrorist organisations….

  6. I think this research is False coz their is no resource that u can get this freaking research. U may only get government institutions more over Somalia isn’t the worst country on earth but we are the best country on earth . I know that u might say that We don’t have central government But look our aim ana our believe I was born with out government And I am living with out a government but i have every thing that i want and need.
    I have bachelor degree in Economics and i have a job regularly. GDP per person in the country Is $750 .

    Thank u for sharing The world but Somalia Owns Somalia

    Glory to My beautiful land🇸🇴🇸🇴

  7. It’s like lower-iq slavery. They kidnap people and sell them to other people, they just don’t do any unpaid work.

  8. When the Foreigners ships steal our Fishes and other resources which estimate more than a Billions of Dollars.The UN says the Foreign Ships are protecting the International water.When Somalis try to defend their territorial water and to Avoid the foreigners the world Says they are pirates.What a shameful World we Live in.No matter what we Somalis will protect our water till we get Strong government.Proud who we are.

  9. "$0.28 cents per person per day" that's totally false. Leave upon anything else they spend $10 and more on khat without mentioning the family bill and other things which makes more than $30 per day. A sick joke.

  10. Who gave you the right to talk about my country ?!…and one other thing who ever Enter my mother fucking sea I will fuck them up. Advice for you take another road . The sea is big so why in hell you came to my sea ?!

  11. You didn’t talk about what caused piracy 🏴‍☠️ the poisoning of the Somali waters by foreign vessels and over fishing of the Somali people waters. Innocent fisherman were tired of seeing this and people getting sick who live near the coast by the nuclear toxic waste dumping. There defending there waters & you call it piracy. A bunch of bullshit lies & 1 sided story

  12. This video is bullshit in so many ways. Number 1 – don't ever talk about a country u know nothing of and second wiki = western information which is gibberish.

    #1- If a somali family get 300$ a month, they live a middle class life = the country' food is very cheap. And If they get 500$ then they can affort anything in Somalia. We have iPhone X and all the modern tech products there and they are cheaper than Sweden "where i live".

    #2- Al-Shabab gets 30 million dollors tax from every businessman in Mogadishu "they are going easy on these men", and That's just one city of an entire country. Just Imagine how much money they get from all the other places they r in.

    #3- the goverment gets 200 million from the port of Mogadishu only, this is only from one port. Just Imagine the tax they get from the people and other ports, airports etc.

    #4- the land has 2 great rivers and the farms there produce more than enough food for the entire country, but there is corruption so It's hard.

    #5- the western nations, Russia, China etc come to our ocean and steal all the natural resources and dumb all the trash of nuklear etc there.

    #6- the pirates were actually created by the USA, and after afew years they turned on the USA because the USA tried to clean their mess.

    I can keep going about all the wrong things this dude said about My country which i do not appreciate but i think this is enough to educate him. I would personally support the somali pirates because they keep these thieves off our seas.

    The western r horribe countries because they r the ones who destroyed our country and still destroying it through other countries etc.

  13. The worst country in the world. I am from Ethiopia and Somalia is a very bad country. Always fighting and killing each other. I wish peace for them but they don't like peace.

  14. Great video until you described the best solution as basically building their country for them, it didn't work in Rhodesia, it didn't work in South Africa, it won't work here. You can give them a perfect country, with all the tools to continue, and they'll just destroy it. This isn't a racist rant, it's just fact. The only real way to fix it, is to kill every pirate, every time.

  15. Somalia: has a civil war

    Companies: steal fish and dump toxic liquids into the sea in Somalia

    Somalians: becomes pirates

    Whole world: we did nothing why did they attack us

  16. skilllshare is teaching Somali how to hijack Ships for the longest line Shore in Africa how lucky we are lol

  17. Somalian pirates are just partners of the Panama canal, they help to get more clients for it.

  18. Piracy costs between 4 and 8 BILLION per year to the shipping companies. If that amount was put in to help Somalia get back on it's feet, that would already reduce piracy

  19. Somalian will do anything Somalians and Egyptian are some of the earliest slave dealers in the world, at onempoint Somalian make money exclusively by selling African people to Arabs & European 3 Somalian men is know to sell 400 people for 3 dirty old European wool suits what have no use to them in hit Africa .

  20. The guy making this video is a fucking idiot. Somalia is a lost shithole with no future. Only solution is mounted machine guns.

  21. Just send a remote controlled ship with a Nuke on it . When pirates take the ship to their port detonate the Nuke . Simple !! That's how you solve the pirate problem .

  22. If they can go through all that to try and rob a ship they sure as hell can legally come to a better country and make their life good

  23. Learning how to work and then working to make money requires money and years. In a country which is poor and where life expectancy is low, becoming a pirate is a promising career.

  24. That why you invest in private army, stationed on the ship. Any small boats approaches, use warning shots. They're not stopping? Sink them.

  25. “Aaahhhrrr, ye come seekin’ adventure and salty ol’ pirates, eh? Well, you’ve come to the right place!”

  26. Somalia has rainfall more than popular countries like Egypt and khaleejs a lot of plants are there we have resource but when we get strong government you will see we will be lions of Africa

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