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The business model of pirates
A group of investigators, named the Monitoring Group, that was sent by the Security Council to Somalia has released an encyclopedic, 110 page study of the criminal situation in Somalia. The media, however, has fanatically picked up on the diversion of food sent by the World Food Program from the needy to armed radical Islamist and corrupt contractors. Browsing over the report, however, I came across a short, rather interesting hidden explanation in the annex of the business model of the Somali pirates which is just remarkable:
A basic piracy operation requires a minimum eight to twelve militia prepared to stay at sea for extended periods of time, in the hopes of hijacking a passing vessel. Each team requires a minimum of two attack skiffs, weapons, equipment, provisions, fuel and preferably a supply boat. The costs of the operation are usually borne by investors, some of whom may also be pirates.
To be eligible for employment as a pirate, a volunteer should already possess a firearm for use in the operation. For this 'contribution', he receives a 'class A' share of any profit. Pirates who provide a skiff or a heavier firearm, like an RPG or a general purpose machine gun, may be entitled to an additional A-share. The first pirate to board a vessel may also be entitled to an extra A-share. At least 12 other volunteers are recruited as militiamen to provide protection on land if a ship is hijacked, In addition, each member of the pirate team may bring a partner or relative to be part of this land-based force. Militiamen must possess their own weapon, and receive a 'class B' share - usually a fixed amount equivalent to approximately US$15,000. If a ship is successfully hijacked and brought to anchor, the pirates and the militiamen require food, drink, qaad, fresh clothes, cell phones, air time, etc. The captured crew must also be cared for. In most cases, these services are provided by one or more suppliers, who advance the costs in anticipation of reimbursement, with a significant margin of profit, when ransom is eventually paid. When ransom is received, fixed costs are the first to be paid out. These are typically:
* Reimbursement of supplier(s)
* Financier(s) and/or investor(s): 30% of the ransom
* Local elders: 5 to 10 %of the ransom (anchoring rights)
* Class B shares (approx. $15,000 each): militiamen, interpreters etc. The remaining sum - the profit - is divided between class-A shareholders.
Driven by an impressive success rate, the high profitability and relative low risks of piracy of the Somali coast has wielded a business model designed for the ages.
Do they teach that at Wharton?Efficient Markets Hypothesis is thoughtfully Disproved
Daniel Gross writes:
This afternoon, while walking into the Congress Center, the main hub of Davos, I noticed a piece of gray paper on the floor. It looked like it might be currency of some sort—certainly not a dollar, but perhaps Swiss francs or something else. I started to bend over to pick it up, but then I caught myself. This is the World Economic Forum. It is populated by hundreds of economists and by thousands of business people schooled in the tenets of economics. This is possibly the most rational, profit-maximizing concentration of human capital in the world. These are the actors who make up an efficient market. And of course adherents to the efficient market hypothesis famously don't believe in the concept of found money or found savings...
But I'm a connoisseur of economic irrationality. And so I bent down and picked up the paper. On one side, the grim visage of Queen Elizabeth. On the other, Charles Darwin. It was a 10 pound note, worth about $16.25. Just lying on the floor, unmolested by Nobel Prize-winning economists, CEOs of Fortune 500 companies, and financial journalists.
Gross concludes the efficient markets hypothesis must be false.
I've managed to lose a 100 Euro note before and as I read this, I can think of this irrational transaction as one of many that occurs daily. Then again, EMH describes the market as a whole whereby all actors can theoretically be wrong - in this sense - throw away cash.
ein Notebook ist eine Werbefläche
One of my competitors could have similar awkward ideas at this year's competition.
I am always thinking that my idea can be awkward at times but everyday I come across weirder ideas that was given a chance and have had the opportunity to be accepted and actually, mysteriously raised CASH. Oh yeah for those us who can't read German. My title states the basic idea of a German company, Smaboo , that uses laptops literally as an advertising platform. The idea is that students would apply to have their laptops sponsored while they go about their daily collegiate activities. Smaboo then just goes out and convinces a company, print out a sticker and send it to you. You stick it on your laptop. You make money.
