We’ve Slashed Prices to Make Room for New Inventory! Say Somali Pirates

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There may still be time to take advantage of the fantastic deals being offered by Somali pirates, but act now – they can't last forever.

Reuters reported last month that Somali pirates had said they were willing to lower their ransom demands on selected ships. Why? Too much inventory. ""[E]ach of our groups holds ships now," one pirate told Reuters, claiming that in total they were holding more than 30 ships, which had been on their balance sheets for an average of 150 days each. And when the product isn't moving, the pirate explained, "there is no excuse for taking high ransoms."

Another pirate, identified only as "Abdullahi," said that the piracy business had changed since they got into it in 2007, and that business practices had to change, too. "We have changed our previous strategies," he said. "We have altered our operations and ransom deals with modern business deals." It's all about volume and the cost of inventory, you see. "We want to free ships within a short time," Abdullahi said, "instead of keeping them for a long time and incurring more expenses in guarding them," a solid business strategy that you could hear at any local car lot. "We have to free them at a lower ransom," he continued, "so that we can hijack more ships."

There is also the simple fact that the piracy business has gotten more competitive as other guys try to cash in on the success of the early entrepreneurs, or to get themselves a cut of the profits, anyway. In this case, it's al Shabaab, which may sound like the name of another pirate ("People tell me, 'Al Shabaab, you have to be crazy to offer these kinds of discounts!'") but in fact is an Islamist rebel faction with alleged ties to al Qaeda. Al Shabaab has evidently "struck a deal" (Reuters' phrase) that gives it a 20-percent cut of ransoms, a "deal" that presumably involves giving it 20 percent in exchange for not being killed.

Abdullahi rejected any implication, though, that the new business strategy reflected a need to increase turnover and reduce inventory costs in order to pay al Shabaab and still make a profit. "Al Shabaab has nothing to do with our plan to lower ransoms," he insisted. "Low or high ransom, the agreement is fixed."

I realize that normally we should be fans of the free market, but this is one business where a lot more regulation would be a really good idea.