People I (Mostly) Admire 80. Get Your Share of the Pie
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Jun 18, 2022 Barry Nalebuff, a Yale economics professor and co-founder of Honest Tea, shares his entrepreneurial journey and innovative negotiation strategies. He dives into how basic economics shaped Honest Tea's success, including the ideal sweetness for beverages. Barry recounts challenges like the humorous incident with Honest Kombucha and talks about the complexities of negotiations, highlighting psychological tactics and the importance of fairness. He also explores the intriguing dynamics of travel cost-sharing and industry pricing strategies, making business both enlightening and entertaining!
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Excessive Sugar
- Bottled tea companies failed basic economics by adding excessive sugar, ignoring declining marginal utility.
- Each additional teaspoon of sugar adds less value but the same amount of calories and cost.
The Babysitter Theorem
- Nalebuff applied the "babysitter theorem" to tea, arguing that the fixed cost of bottling justifies higher-quality tea.
- Companies using cheap tea failed to recognize the value proposition of a premium product.
Honest Tea Financing
- Nalebuff's Honest Tea offered investors 100% ownership initially, clawing it back as the company succeeded.
- This unconventional approach resulted in investors getting a 23x return and Nalebuff regaining 40% ownership.
