Recently we visited the office of a friend at a young Silicon Valley startup. It didn’t take long for us to spot the first pirate flag — the skull and bones that characterise the renegade attitude inherent in Silicon Valley’s tech disruptors.
Steve Jobs’s now famous maxim, originally said to the Macintosh team in 1982, started it all: “It’s better to be a pirate than to join the navy.” This rebel spirit has since trickled into the rest of Silicon Valley. Mark Zuckerberg has continued the spirit with his own rebellious maxim: “Move fast and break things.” Silicon Valley — and its disruptors — run on rebellion, a low regard for risk, and phenomenal innovation. The pirates of Somalia happen to use the same exact recipe.
Why has the term “pirate” come to characterise all that is admirable in an entrepreneur? Because behind modern-day piracy’s unrepentant criminality lie tremendously bright innovators. Piracy is far more sophisticated and complex than its media image, for pirates too must develop structures, streamline logistics and stay adaptable.
Harardheere, a village on the northern coast of Somalia, established the world’s first pirate “stock exchange” in 2009, where locals can buy shares in pirate gangs planning hijacking missions. Although credible statistics are difficult to come by, sources point to an exchange that lists 70 “companies”.
And whereas the risks of undertaking a mission are great, the rewards can be plentiful: according to Paul Kearney, of the Royal Marines, the typical payoff is now 100 times what it was in 2005, and the number of attacks has rocketed. Although a raid can cost $30,000, the reward for a successful mission (one in three) can be in the millions.
Like startups, a piracy mission begins with a search for venture capital. “Pirate capitalists” court investors who will, according to J Peter Pham of the Atlantic Council, offer $250,000 or more in seed money. The capital is then spent on recruitment (gangsters, tech-savvy savants, caterers), intelligence (negotiators) and materials (speedboats).
Once seed capital is raised, the startup gets built and the product (hijacking) heads to market. It sounds simple enough. But what can Silicon Valley really learn from the literal pirates?
Stealth and surprise: key to the radical success of pirates is their stealth-and-surprise approach. David James of Henley Business School notes that the pirate’s decision to avoid “symmetrical” conflict helps him. Rather than challenging their targets head on, pirates surprise and attack their enemies at their weakest points, giving them no time to react. Consider peer-to-peer lending. It might be overwhelming and eventually unsuccessful for a small startup to battle a traditional bank head on for market share. Instead, startups such as Zopa pick a localised fight (inflexible lending policies) and unexpectedly attack before traditional banks can react. Indeed, the success of the collaborative-consumption model depends on this strategy; car-lending firms such as Zipcar have forced car companies to reconsider their ownership-dependent business model.
Pivot: Somalia was not always a hotbed of piracy. Following the government’s collapse in 1991, its territorial waters could not be enforced, so foreign fleets trawled Somalia’s waters, stealing its fishing stock and destroying livelihoods. At the same time, the Chinese began prolifically exporting to Europe via Suez, leaving Puntland’s ex-fishermen with billions of dollars in cargo floating past them.
So they pivoted from fishermen to pirates. “Boya”, the most infamous pirate, tells of a small band of ten raiders who started attacking fleets, then grew into a large, well-run criminal organisation. Instagram did a similar thing — when Kevin Systrom and his team created Burbn, a check-in app which let you also add photos, they saw little engagement from customers, apart from the photo-sharing bit, which people used actively. So the Instagram team, in true pirate style, did what Eric Ries calls a “zoom-in pivot”: they built a simplistic photo app with filters.
Innovation has long come from misfits. Historically, pirates — far from being economic anarchists — opened up international trading markets. Historian Thomas Gallant argues that illegal networks of armed predators actually facilitated the spread of capitalism. In Gallant’s words: “Bandits helped make states and states helped make bandits.”
Pirates are ruthless criminals, yet their innovative and adaptable business model is not without its lessons. We do ourselves a disservice should we neglect to learn from those who innovate on the high seas.
Kyra Maya Phillips and Alexa Clay are the authors of The Misfit Economy (2013, Simon & Schuster). misfiteconomy.com. Follow them on Twitter @thisiskyramaya & @alexaclay.