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How Pirates Decide What Ransom to Ask For

How do pirates decide what ransom to ask for?

The answer, from an interview with an actual pirate, might surprise you.

Reading The Invisible Hook really got me hooked on learning more about pirates.

Despite what many think, they are very smart and intuitively grasp governance, incentives, and other aspects of human nature. The interview below touches on incentives, reinforcement, moral hazard, and anchoring.

How do you pirates decide on what ransom to ask for? What makes them negotiate downwards?

Once you have a ship, it’s a win-win situation. We attack many ships everyday, but only a few are ever profitable. No one will come to the rescue of a third-world ship with an Indian or African crew, so we release them immediately. But if the ship is from Western country or with valuable cargo like oil, weapons or then its like winning a lottery jackpot. We begin asking a high price and then go down until we agree on a price.

How do you know a ship in far away coast in the first place and its flagship?

Often we know about a ship’s cargo, owners and port of origin before we even board it. That way we can price our demands based on its load. For those with very valuable cargo on board then we contact the media and publicize the capture and put pressure on the companies to negotiate for its release.

From what I’ve seen, initial demands tend to be about 10 times the previous publicized ransom, is this a rule of thumb?

We know that we won’t get our initial demands, but we use it as a starting point and negotiate downwards to our eventual target.  But as a rule, yes, that’s about right.

Does the length of a hijacking change the ransom that pirates are willing to accept?

Yes. Armed men are expensive as are the laborers, accountants, cooks and khat suppliers on land. During long negotiations our men get tired and we need to rotate them out three times a week. Add to that the risk from navies attacking us and we can be convinced to lower our demands.

Under what conditions would you kill the hostages?

Hostages — especially Westerners — are our only assets, so we try our best to avoid killing them.  It only comes to that if they refuse to contact the ship’s owners or agencies.  Or if they attack us and we need to defend ourselves.

What are the key factors to making a successful attack on a ship?

The key to our success is that we are willing to die, and the crews are not. Beyond that, in my case deploy a boat with six men to get close to the ship and leave another in reserve near the coast just in case we need backup. We use sophisticated equipment that allows us to spot our targets from a distance. We always have to be close to the main sea lane and keep in touch with each other using talkie phones.

What is the easiest way to board a ship?

One person has to board first and then throw a rope or ladder over the side for the rest of the men to climb aboard. It works best if he isn’t resisted.

How much does it cost to outfit a pirate mission?

A single mission with 12 armed men and boats costs a little over $30,000. But a successful investor has to dispatch at least three or four missions to get lucky once.

How are the pirates organized? (Are there pirate leaders, financiers, and specialists?)

The financiers are the most important since they organize and plan the big shot operations and are able to pay running cost[s]. Financiers always need to forge deals with traders, land cruiser owners, translators, business people to keep the supplies flowing during operations and manage the logistics.  There is a long supply chain involved in every hijacking.

How do the pirates know that the Navy won’t shoot or arrest them once they leave the hostages behind?

Whenever we reach an agreement for the ransom, we send out wrong information to mislead the Navy about our exact location. We don’t want them to know where our land base is so that our guys on the ship can manage a safe escape. We have to make sure that the coast is clear of any navy ships before we leave. That said, there is no guarantee that we won’t be shot or arrested, but this has only happened once when the French Navy captured some of our back up people after the pirates left the Le Ponnant.

Are there internal conflicts within the pirate gangs?

No. In piracy, everyones’ life depends on everyone else’s. There is some professional competition between groups, but we cooperate with information and logistics when it’s required. We won’t fight amongst ourselves as long as the money is paid as promised.  We have never had any conflicts within my group.

How dangerous is it to be a pirate?

Very dangerous. Sometimes you run out of rations far from the coast and die hungry and in the cold with nothing to show for your efforts. Sometimes you drown while boarding a ship, or die when they fight back.

Still curious? The Invisible Hook looks at legendary pirate captains like Blackbeard, Black Bart Roberts, and Calico Jack Rackam, and shows how pirates’ search for plunder led them to pioneer remarkable and forward-thinking practices.

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