Split the Pie

Barry Nalebuff is a professor at Yale's School of Management, where he has taught for more than thirty years. He is an expert in game theory, and has written several books including Thinking Strategically, The Art of Strategy, and Mission in a Bottle. He has advised numerous firms in major M&A transactions, and is the founder of several ventures including Honest Tea, Kombrewcha, and Real Made Foods. Dr. Nalebuff's Introduction to Negotiation course (teaching the Split the Pie methodology) has more than 350,000 enrolled students at Yale and online at Coursera. He is a graduate of MIT and Oxford University.

The best way to negotiate anything is always to reach an agreement to "split the pie" — to work together to grow a massive pie, and then share the added value created 50-50. This is a highly motivational way to negotiate.

Most negotiations tend to obsess over who is bringing what to the agreement, but in a way that's almost irrelevant. Without the involvement of both parties, there won't be any pie created, and therefore both parties should prosper evenly.

The Split the Pie negotiation methodology is:

1. Start with good GROUND RULES. Negotiations are always stressful for everyone. The best way to approach them is to have some good, principled ground rules. Commit to using "the pie" approach in negotiating where everyone focuses on the additional value created by agreeing to work together.

2. Agree to SPLIT THE PIE & COSTS fairly. The essence of the split the pie methodology is not only do you agree to an even split of the pie, you also agree to a 50:50 split of the costs as well. In the pie framework, everything has to be symmetric. It's the only fair outcome.

3. Work together to SOLVE PROBLEMS. Negotiations can be complex, especially when there are more than two parties involved, when one side obviously cares more, or when the size of the pie is uncertain. Just remember the pie framework still applies. It can be adapted and applied to any and all negotiations.

4. Collaborate to MAKE a GIANT PIE. It's helpful in a negotiation to think of the pie as something that can be made bigger or smaller, depending on what the negotiators do. Good negotiations are never zero-sum, but collaborations to work together to grow a massive pie and enjoy that. The key to getting more in a negotiation is to help the other side get what they want.

5. Let everyone ENJOY HALF the PIE. Great negotiators aren't interested in squeezing every last bit of juice out of every deal. They change the game by figuring out how to make a massive pie, and then cutting everyone in on the action. Figure out how to make the pie big, let everyone enjoy half, and you'll get a great reputation as a negotiator. Sell and use the pie approach in every negotiation.

1. The best way to negotiate anything is always to reach an agreement to "split the pie" – to work together to grow a massive pie, and then share the added value created 50-50. This is a highly motivational way to negotiate.
2. Most negotiations tend to obsess over who is bringing what to the agreement, but in a way that's almost irrelevant. Without the involvement of both parties, there won't be any pie created, and therefore both parties should prosper evenly.

What a great book on negotiation strategies. Yale business school professor Barry Nalebuff has nailed it with his "Split the Pie" methodology. He's taught this to more than 350,000 students at Yale and Coursera. In a nutshell, Nalebuff suggests the best way to negotiate anything is to work together to grow a massive pie, and then split that 50-50. Get everyone focused on creating and adding value to grow a massive pie, and then divide it evenly. Both parties are necessary, and therefore both should share the benefits, irrespective of what brings what to the party.

I particularly liked his idea of agreeing to a post-deal split of what the pie turns out to be when it's unclear at the start. His negotiation for the sale of his startup Honest Tea to Coca-Cola was the perfect example of that approach. Coke agreed to pay a multiple based on Honest Tea's current and projected sales, and then to split the pie for the extra sales which would be made possible by the deal. Very smart, and the driving force behind a massive growth in Honest Tea's business.

Thoroughly enjoyed the book. Great examples. Interesting ideas. A refreshing new and positive way to think about negotiations. Highly recommended.