Barry Nalebuff was on a podcast this past June discussing how he sold his company Honest Tea to Coke for millions of dollars. He is a game theorist who used some basic economic principles to negotiate the best deal from an apparent position of weakness vis a vis one of the largest companies in the world. How did he do this? He discussed the ideas for doing it in that podcast, but he goes into even more detail in his book Split the Pie: A Radical New Way to Negotiate.
The main principle is in the title of the book – split the pie. The goal is to get both negotiators to agree in advance to split the pie evenly. Then they are both on the same side working to figure out how to maximize the size of the pie they will split. One of the key concepts for doing this is understanding the BATNA for both sides. BATNA is Best Alternative to a Negotiated Agreement. This simply means the best outcome for each side if the negotiations fall apart. With the agreement to split the pie and knowledge of BATNAs, it is amazing to see how negotiations can truly become a win-win.
The book goes into quite a bit of detail on the numbers, how to calculate a BATNA, and how to maximize the size of the pie. And since all negotiations aren’t straightforward and simple, he shows how to handle a wide range and type of negotiations. Despite this depth and breadth, the author keeps the books easily understood and approachable with numerous examples, many from real life experiences.
