Honest Tea

I was listening to the first part of Barry Nalebuff’s interview on ‘People I mostly admire’ and it turned out to be pretty cool and insightful, particularly that very rapid sharing of his thinking that developed Honest Tea. It reflect how important simple ideas were when taken seriously and scaled up. And it also helped to demonstrate how an economics (and strategy) professor use his intellect to take calculated risks in entrepreneurship.

He was probably oversimplifying but considering Honest Tea as a product that basically makes use of three simple economic principles:

  • Diminishing marginal returns/benefits (on sugar or the taste of sweetness)
  • Principle of maximising the value of the content of a fixed cost container in order to maximise the overall value of the bottled drink
  • Navigating trade-offs on the marginal utility curve: Convincing people to trade off the lower sugar for the fact that the drink had lower calories

That is pretty brilliant as a way of thinking about a market and a product; those ideas are simple and yet profound precisely because the world had not evolved solutions around a combination of these ideas prior to Honest Tea.

I highly recommend you give the podcast a listen.